The economic fallout of the coronavirus pandemic has presented banks, credit unions, and other lenders with a number of challenges. Among the most significant has been maintaining a balance between supporting the needs of clients and members, and protecting the stability of their organization within an environment of heightened credit risk.
While the long-term impact of the COVID-19 crisis is still to be determined, at least one thing has become increasingly clear: organizations will need to adapt and pivot their business strategy for a new normal. For the financial services sector, this includes taking steps to become more agile and to reduce credit risk exposure.
How can artificial intelligence (AI) help lenders adapt and grow?
In a recent webinar, BDO and MindBridge provided an overview of an AI platform that can help lending organizations mitigate risk and streamline operations.
As lenders look ahead to recovery, AI, machine learning, and data analytics are key considerations for a post-COVID-19 business strategy. Here are six areas where AI can help your lending institution.
1. Predicting future losses
COVID-19 has brought about a stressed financial environment that, sooner or later, will affect credit quality and credit losses. An AI dashboard uses various criteria points to help your staff better predict and prepare for these losses by highlighting patterns and trends—right down to the loan type, region, branch location, etc.
2. Agile risk management
While not a replacement for your risk management procedures, AI can complement the internal controls and early warning systems already in place around loan approvals, disbursement, and monitoring.
It can help uncover anomalies and potential fraud incidents that may have been missed otherwise.
A strong AI dashboard can also provide regular insights on the overall health and status of your loan portfolio in real time, allowing you to make more accurate risk assessments and pivot as necessary.
3. Enhanced decision-making
In a post-COVID-19 world, lenders will likely exercise greater caution when it comes to credit risk. AI can help flag potential problems and potential biases at the loan authorization stage. It can provide managers with greater visibility and access to data, to make decisions that align to the organization’s risk appetite and policies.
4. Liquidity management
The coronavirus pandemic has increased the liquidity pressures banks and credit unions face when managing loan portfolios. Going forward, lenders may need to have greater amounts of liquidity at particular points in the business cycle, to safeguard against similar situations.
AI measures and analyzes behavioural patterns within a lender’s loan portfolio to improve efficiency. It can help management monitor where and how funds are moving and what level of liquidity is needed to stay within acceptable risk boundaries.
5. Identifying new opportunities
An AI platform centralizes data from your organization’s core financial systems, customer or member data, loan originations, marketing campaigns, and other sources, to help you assess your loan portfolio and overall market position. It can uncover hot spots that lead to new product offerings, or opportunities to streamline back-office processes and improve efficiency.
6. A more effective workforce
Even for larger institutions with dedicated data analysts, gathering and analyzing data points from multiple systems is an arduous task. AI has the power to harness disparate sources and systems, and automate the tasks of merging and analyzing information in a repeatable fashion. This can free up your staff’s time to solve other challenges as well as identify any workforce issues. A decrease in sales, for example, could indicate the need for additional training on certain products.
How BDO can help
An effective AI strategy will be unique to your organization and the challenges you need to solve. Our team has the experience and resources to help you through each step, from assessing your organization’s risk exposure and developing a proof of concept, to implementing an AI-based solution that works alongside your in-house systems.