New-age Tech: The Solution to Digital Lending Frauds

The Indian banking industry has been grappling with large value loan frauds for some time now. In 2018-19, loan frauds accounted for 90% of the entire value of bank frauds while in 2019-20, they accounted for 98% of total frauds. Recently, RBI constituted a working party on digital lending to review both regulated lending activities and unregulated players.

Credit rating driven by technology can help financial institutions mitigate risks early within the process. Technologies like Artificial Intelligence, Machine Learning, Blockchain and Big data analytics can allow a more accurate and extensive credit risk profiling.

Leveraging actionable data insights

Banks collect large amounts of unstructured consumer data that hardly holds any value within the decision-making process. AI can mould this data into actionable insights. These tools not only utilise data collected from traditional sources, but also leverage alternate data like a borrower’s social media activity, daily transactions, utility payments, employment history, education and more (It is extremely important to make sure that data collection is consent-based). The more data the tools need to analyse, the higher the insights are. So, they will create loan distribution models that build trust and reduce risk.

Minimising human intervention and bias

Integration of AI facilitates the removal of human intervention. Decisions made by humans are influenced by their biases which may end in loan frauds. AI-driven tools run the available data against a group of rules to work out the borrower’s acceptability. This also allows for faster credit risk assessment which results in lower risk for the financial institutions.

Technology to remain secure and relevant

Many organisations have already incorporated AI and blockchain technologies in their risk-detection processes. Alongside being beneficial to financial institutions, digital experiences that involve AI, Machine Learning, blockchain and other technologies provide quick results that also are customer-centric. In an increasingly digital world, banks and other financial institutions must prioritise technology to remain relevant.

Saarathi, offered by Decimal Technologies adopts the latest advanced tech such as AI, Machine Learning and API integration to provide a unique, bias free and accurate digital lending platform.