Impact of Artificial Intelligence on Credit Scores in Lending Process

Abstract

The credit scoring remains always concerned about developing an empirical model to support the financial decision-making process for financial institutions in the most efficient manner. Currently, the use of technology for credit score is not universally adopted by financial institutions because there is lack of evidence to ensure the effectiveness of this alternate method. Thus, the aim of this research is to recognize the impact or effect on the financial institutions which they have experienced post integrating AI in their institution for generating credit scores for the lending process. The data was collected from 68 Credit Officers/Credit Managers working in Financial Services Provider companies. The semi structured questionnaire was used to understand the use of AI and the perception of Credit Managers towards using AI in the lending process. The primary and secondary data were analysed to evaluate the impact of using AI in calculating Credit score. The research suggested that the financial institutions consider time saving with lesser workforce, Increase in Revenues and Business, Default rate reduction and Skill upgrade along with not breaching privacy of their customers. The FinTech companies can understand the factors in a better manner to develop their products for the financial services providers. And the financial institutions can make a better use of AI to reach out to more prospective customers and provide better.