Current Pandemic conditions around the globe are driving mostly all the lending businesses, financial and banking institutions to reform the traditional way of lending to existing and potential clients.
Why?
Because with tighter restrictions and uncertain future, not all the borrowers potentially could return the loans. Some businesses are closing down, some of them will stay afloat with a furlough staff government scheme in place. The seasons are passing by and savings or operational capital are running out.
What is next?
According to BBC: Debts including credit card debt and personal loans rose 11% to £119bn in the two years to March 2018, according to the ONS study, which is published every two years.
The top UK Bank economists predict, that 40-50% of the CBILs loans will unlikely to be repaid. It’s a 400K+ loan that will go to default. In absolute figures, we are looking at £16 billion-plus…
How to avoid it, or predict it with a better proxy we will discuss it today.
Based on what we had touch pointed in a “New Approach” of seeing data, with use of alternative information and data sets, Quantitate and Qualitative algorithms and models, interconnecting with each other via ML to visualise and predict a true portrait of the borrower. Today we will take a step further.
Let’s assume, that all financial institutions will all at once go digital and all interactions with the banks will go online. Currently, during COVID-19 we have already started to notice this shift, and this trend likely to be an ongoing practice, as it will save money for the institutions by closing traditional branches and widely practicing working from home scheme with help of AI-chat bots and pre-filled up applications, linked to open source bases via API protocols.
So, and?
Finally, we are lifting some curtain from what is behind the scene. With the global cost-cutting traditional and tech-savvy banks and financial institutions will go digital with help of vigorously executed AI & ML solutions, that are “Human Alike” for decision making able to verify and predict the score and portrait of the borrower (which is already used retail lending businesses & commercial in the future). The use of alternative data points, such as Social Media, Cookies, spending habits, travelling, and more will become very handy in predicting the risk of default.
Have you seen “Black Mirror”- Not yet? It’s a 2016 (1 Episode, 3trd Season) of science fiction movie with a great evaluation where we could end up, but hopefully not.
In Future the score, the system could be a source of information, that allows us to cut the threat of criminal activity and becoming as an ID or a “Digital Passport” for most of us.
Currently in Nanjing / China, a testing ground for the social ranking, the “Moral Compass” is becoming a “New Normal” for everyone with a help of aggregated “Big Data”.
Let’s hope, that technology, that we create today to serve us for the good, will stay that way, and we are not changing the course of humanity to the worse.
Please share your thoughts.
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