Among the craziest technologies of the era, the two that stand out and are playing crucial roles in the financial industry are popularly known to be Artificial Intelligence (AI) and Blockchain. They have reformed traditional loan processing and approvals from conventional lengthy procedures to efficient and secure ones. Now let us focus on how these two technologies, artificial intelligence (AI) and blockchain, are transforming the procedure of loan approvals and underwriting and making them efficient as well as reliable.
The integration of AI and Blockchain has a ton of possibilities for transforming the financial sector, mainly concerning the loaning and underwriting process. Here are a few ways in which AI and Blockchain can be used together to improve these processes:
The use of the blockchain to record transactions enables a secure managing of sensitive information like credit check, income, and other vital information. This, in turn, may be analysed by utilizing AI algorithms to produce more accurate applications for loan approvals and underwriting.
Speedy loan processing can be attested by the fact that when the loan approval process is mechanized through AI algorithms, the time taken in the processing of loans can be reduced. AI can sort through data in real-time thus coming up with a decision much earlier than a loan officer.
Using AI, it is possible to analyze large amounts of information on an individual’s ability to repay a credit and spending habits, income, and previous payment history. This makes it much easier for the agency to credit score and, at the same time, reduces and or eliminates the possibility of default.
Information analyzed by artificial intelligence includes rather large sets of data, which contributes to minimizing the number of human errors. This also assists in avoiding a situation where loan approvals or underwriting decisions are made based on wrong or outdated information because of fraudsters’ participation.
Seamless tracking of loan approval and underwriting process—Since it is based on the blockchain technology, the record of all the transactions made through the technology consists of a blockchain, which is ‘‘chronological, secure, cross-platform, and easily accessible’’; the use of blockchain makes it easier to track the loan approval and underwriting process from the point of origin to the point of culmination. The above facilitates the development of trust as well as enhancing the level of transparency within financial services.
Together, the blockchain and AI can improve the contemporary loan and underwriting workflow. This means according to the borrower’s profile and credit rating, smart contracts can be initiated with preset terms and conditions to be fulfilled. Due to the characteristics of AI, it can define criteria for approving and rejecting loan applications. Also, blockchain ensures the existence and availability of the loan record and the details of the agreed terms on the network that can be accessed by everyone. This may kind of cut down on fraudulent cases as well as enhance the efficiency of loan approval and underwriting.
Using AI and Blockchain technology and processes to transform loan approval and underwriting in Financial Services.
AI is a trending technology that can transform most areas of the financial industry. Credit score check: Pre-determined AI data analysis techniques will be used to decide just how credit-worthy an individual/organization is. TensorFlow, an open-source software library for machine learning (ML), deep learning (DL), and natural language processing (NLP), is proposed in this implementation. TensorFlow is an exercise in building AI and is used by companies and organizations across the globe for training models.
Blockchain technology is the distributed database of transaction records that are protected under a highly complex network of computers. Here, the concept of a central blockchain platform that will be used for the storage of all financial data concerning the loan approval and underwriting process will be utilized. The blockchain platform to be used in this implementation will be Diamante Net, which is a Layer 1 blockchain network that uses DIAM tokens tokens for authentication and cross-chain interoperability, enabling efficient and low-cost transactions across multiple blockchain networks such as Hyper Ledger Fabric with instant document sharing and management using Binance Greenfield.
Application of AI and centralized Blockchain technologies can help eliminate the need for loan approval and underwriting systems, maintain a decentralized record for all transactions, and minimize the probability of errors. The implementation will involve the following steps: The implementation will involve the following steps:
For financial data like credit history, income, etc., the smart collection of necessary information can be stored in the blockchain ledger. For this purpose, Hyperledger Fabric will be used.
Once the data has been procured and stored, the utilization of AI’s – ML and DL will define the creditworthiness of an individual/entity. The following information will be applicable in cases of approving loans as well as underwriting. As for the implementation of AI, TensorFlow is selected.
Use of AI will mean that loan approval and underwriting will be done automatically and this will least time for processing of loans and eliminate chances of human errors. The proposed AI algorithms are to be deployed using Python language.
This allows for reducing human influence in loan approvals and underwriting decisions since AI is able to analyze large amounts of data, reducing the probability of including wrong data in the decision-making process.
A blockchain infrastructure allows for the processing of all the steps of loan approval and underwriting by means of a clear record of transactions. This goes a long way in developing trust and enhancing the level of transparency, especially among financial service providers.
Integrated AI and Blockchain technology to automate loan appraisal and underwriting have the possibility of improving and transforming the financial services sectors. Thus, as loan approval and underwriting becomes automated, the chances of human errors will decrease as the record of all transactions becomes transparent and securely stored in the blockchain. Solutions such as Hyperledger Fabric, TensorFlow, and Python presented in the framework of the recommendation give a detailed idea about how to establish AI and Blockchain in financial services.
As financial institutions continue to adopt and integrate these technologies, we can expect even greater innovations and efficiencies in the financial landscape, ultimately leading to improved customer experiences and more robust financial systems.
