The future of loan decision platforms

Artificial intelligence, blockchain and digital lending platforms are being adopted by financial services providers at a very rapid pace. It is surprising then that even today over two billion adults across the globe do not have access to formal and affordable lending. ‘Financial inclusion’ is therefore the biggest problem that lending platforms of the future need to solve.

Sameer Aggarwal, Founder & CEO, RevFin envisions the future for loan decision platforms here in India, and how technology will play a major role.

Before we explore how technology and innovation can help in delivering the basic human requirement of credit, let us understand the reasons why people get excluded today. The most common reasons for these are – education, geography, language and credit footprint.

Lack of formal education means people are unable to read or write on lengthy application forms. Several geographies are not served by formal lenders due to high cost and inaccessibility. People do not understand the official language used by lenders. And in many instances, there is no data on past credit performance. This can be because this data is not recorded, or a person has never taken credit in the past.

Each of the reasons above need to be solved separately. India has more than 1 billion mobile phone subscribers, of which 500 million use mobile internet. As cost of mobile devices and data usage reduces, its adoption will increase. Therefore, a mobile phone is the best distribution channel for loans. It eliminates the problem of geographical inaccessibility and high set up cost of bank branches.

A mobile application with image, video and voice-based UI will eliminate the problem of education and language. Imagine an application that speaks to you in your preferred language rather than displaying fields in English that need to be filled in.

Underwriting a loan application without historic financial performance data is difficult. However, this can be achieved using a combination of psychometrics and biometrics. Let us take an example where an interactive mobile application is asking a user to provide voice or click based responses to questions on why they need a loan? How much they need and for how long? While the user is responding to these questions, the application can capture the user’s voice modulation, pupil dilation and facial movements. Smart watches and fitness bands can also capture pulse rate and body temperature changes. All of these data points collected can help in determining the user’s identity, presence and honesty. In fact, pupil dilation is one of the most certain ways of determining honesty.

A user can also be presented with image or video based psychometric assessment to determine their personality. In this a user would simply be presented with some images or situations that they need to respond to. These would only take the user a few seconds to complete and can establish their personality profile. This can then be used to understand their intention to repay a loan.

All of the above combined with the use of digital data from a user’s phone and use of artificial intelligence and machine learning algorithms, can make loans available to everyone. Use of technology may seem intrusive and perhaps even scary at times. But if used in a secure way with customer consent, it is the best way to bring financial inclusion and economic empowerment to those at the bottom of the pyramid.