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Finicity: Leveraging AI to Simplify Digital Verification

There have been many reports published in the last year documenting the effects of COVID-19 and how the financial industry has been affected by the shift in consumer attitude. When looking at the lending landscape, one only needs to look at how mortgages were affected. Mortgages weathered a unique dynamic driven by consistently low rates and increased demand: applications were 26% higher than in 2020, while refinancing applications were up 105% from 2019. As the market competitiveness grows, companies must begin finding ways to get an edge over the competition.

One way of doing this is through the implementation of AI. Removing the ability for human error and able to complete the workload in a much more efficient manner, AI is a must for adapting to the new, digital world.  Nick Baguley is the VP of Data Science at Finicity. Having been heavily involved with AI and automating data for many years, Baguely is an expert in the field. Here, he spoke to The Fintech Times about covid-19’s effect on the lending landscape and how Finicity Lend was using AI capabilities to open the door to more possibilities – something other companies could learn from:

Nick Baguley, VP of Data Science at Finicity
Nick Baguley, VP of Data Science at Finicity

The economic shockwaves of covid-19 had a significant impact on lending markets, including both credit and long-term lending like mortgages. Many reports showed consumers increased their credit card debt during the pandemic, and long-term loans like mortgages weathered a unique dynamic driven by consistently low rates and increased demand. Mortgage applications were 26% higher than the previous year, while refinancing applications were up 105% from 2019. This duality set the stage for the highly competitive lending market that many borrowers are experiencing today.

These changes come as many critical financial processes, including lending, are seeing the impact of new technologies. As we look forward, Artificial Intelligence (AI) is one of the technologies that has the ability to make lending and verification processes easier and more efficient.

A Renewed Look at Credit Review

At any level, the landscape of lending is changing dramatically and is poised to change even more, particularly as open banking — the use of consumer-permissioned data in critical financial processes — permeates the financial world and changes the way consumers view and experience their own finances.

The changes in how borrowing risk is assessed have been accelerated by increasing scrutiny over the traditional credit review process, with the goal of ensuring that the credit review process is fair for all consumers and to give consumers greater benefit from their own financial data.

The Consumer Financial Protection Bureau (CFPB), major financial institutions, and many financial technology companies have long been working to create a mutually beneficial relationship when it comes to the use of consumer-permissioned data in critical financial processes like lending.

Covid-19 Market Changes

A renewed look at the future of lending has never been more relevant. Social distancing, quarantines and lockdowns also increased consumer adoption of digital and remote solutions. US eCommerce sales jumped 37% by Q3 2020. The utilisation of telemedicine and remote diagnostics increased. Remote education relied on digital learning solutions, as well as virtual communication tools like Zoom. Consumers, especially digital natives, were already expecting and becoming accustomed to digital solutions in many industries.

As social distancing became the new norm and many employees shifted to a work-from-home model, borrower priorities began to change. Concerned about the future, many city slickers traded their penthouses for country homes in an effort to maintain mental and physical health. Between March 15 and April 28, 2020, moves from New York to Connecticut increased 74%, according to FlatRate Moving. Moves to New Jersey saw a 38% jump, while Long Island was up 48%.

These changes also increased desire for entirely digital interactions amongst the population as a result of covid-19, encouraging lending companies to shift to a digital model that reduced the time, stress and friction usually associated with the lending process.

One-Touch Verification Goes Digital

In a Lightico survey of over 1,000 US consumers in May 2020, 79% of respondents said they wanted more all-digital processes from their bank in the future. The survey also revealed that 43% of consumers are less likely to take a loan if a physical visit is required. Digital lending solutions are not only able to keep up with consumer demands but also streamline verification processes that cut origination times. Digital verification solutions, like the ones utilised through open banking platforms, enable banks to adapt to high volumes and empower consumers along the way. A completely digital workflow informed by a company-wide digital-first strategy enhances mortgage companies with consumer-first experiences that accelerate growth and increase ROI.

When it comes to trusting digital verification services, digitally inclined consumers will look for touchpoints to feel safe. Recent FICO research shows that nearly two-thirds (62%) of US consumers expect to have to prove their identity when opening an account digitally with more than half (54%) across all age groups confident in their ability to use a cell phone to scan identity verification documents, such as a passport or driving license.

Not all friction is bad when it comes to creating a customer-centric process that benefits both lenders and borrowers. Processes that facilitate identity verification within a one-touch experience have the ability to reduce fraud and overall risk by connecting directly to secure financial institutions and getting the most accurate data from the most reliable sources. This level of efficiency is owed in part to artificial intelligence (AI).

Artificial Intelligence Meets Digital Verification

Don’t worry, Siri doesn’t control your financial future. When speaking about facilitating digital verification with AI, we are speaking about leveraging machine learning and neural networks to mimic human intelligence to automate tasks that were once performed manually.

This is especially helpful for those of us who feel overwhelmed by paperwork. A FreeandClear Survey from 2020 revealed that 56% of borrowers find that paperwork is the most challenging part of the borrowing process. Digital verification, powered by AI, automates what loan officers and underwriters once had to do manually. AI has the capability to perform income, employment and asset verification after a lender connects to a borrower’s bank accounts following a consumer permissioning experience. Successful integration of AI in the digital verification process can reduce delays and save up to eight days for asset validation and 12 days for income and employment validation.

Ultimately, AI-powered digital verification enhances the entire lending process, delivering a more streamlined experience for customers, and reducing risk while increasing ROI for lenders. Finicity Lend has been able to successfully leverage AI capability to help lenders meet high demand. In conjunction with AI, Data Access Agreements (DAAs) are used in many digital services across the Finicity open banking platform, in order to expedite the financial experience in the digital age, allowing for innovative services that benefit both the financial institution and consumer. The agreements also set the stage for how the parties involved will communicate and exchange financial data based on consumer consent. Real-time data connections ensure high accuracy so lenders can get the clearest picture of a borrower’s financial situation.

AI is no longer a futuristic concept that is far out of reach. Leveraging AI for digitally focused lending solutions is here to stay. AI can eliminate the need for human interaction which meets today’s generational demands while simultaneously supporting lenders process an influx of applications resulting from a competitive market instigated by covid-19. With the all-star team-up of AI and open banking platforms like Finicity, consumers can benefit from their financial data and increase their chances of getting a home loan. Meanwhile, lenders can enjoy enhanced decisioning and ROI, as well as an innovative workflow that hones their competitive edge.


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