When it comes to artificial intelligence (AI)-driven credit decisions, Chirag Shah, founder and CEO of UK fintech lender Nucleus Commercial Finance, believes it’s all about data.
“Currently, most lenders are collecting massive amounts of data in a form that helps build the right machine learning (ML) and AI tools on top of it, driving business interests and improving lender credibility. We are driving profits,” said Shah. He told PYMNTS in an interview.
Although progress has been made, he said AI has yet to reach its full potential in business lending.
“We still need to bring in more players. [to the table]and that includes not only lenders and technology companies, but also the banks that are providing the final capital for the loans,” he said, noting that to get a sufficient level of comfort with AI, there must be a human in the loan. Instead of adopting a 100% automated approach, improve the process, he added.
Overall, given the billions of dollars at stake, it’s no surprise that AI-powered lending adoption has been slow in the business lending space, he said. However, companies are starting to warm up and embrace innovative technology.
“We’re seeing the tide turn that way, but there’s still a long way to go,” he said.
On the one hand, open banking technology is transforming the lending and borrowing space by allowing loan providers such as Nucleus Commercial Finance to access corporate accounts and make informed credit decisions, reducing the risk of default. said it has reduced the rate by more than 30%. .
“If companies want to work with us, we need to provide access to open banking and open accounting,” he said. “I won’t rent without it”
Implementing AI would be very difficult without open banking data, he said.
The benefits of open banking data also extend to start-ups, which tend to struggle to raise more money because they don’t have enough data.
“But as we collect data on multiple companies that apply to us and allow us to make better predictions, we can also apply that to expand the pool of companies that can work with us, especially younger ones.” he said.
raise money when you don’t need it
Last September, the UK company launched the Pulse data tool to provide regular data-driven insights into a company’s financial performance and increase their chances of getting a loan approved.
“It gives us a monthly snapshot of how our business is performing, and based on our predictive technology, we can point out any problems that may arise and take corrective action,” says Shah. He explained and most often added: Problems tend to arise from cash flow gaps.
He also provided another tip to increase your chances of business success. Unfortunately, most companies look for funding when they desperately need it, and it’s very difficult at that point. ”
On reducing loan approval times and developing one-click instant loans via embedded finance, he said Nucleus has hit about 95% of its goals so far thanks to AI and ML. but with segregated data turned on, filling that gap is slow. Business lender.
“The number of sources you need to get data from is much higher than on the consumer side,” he explained.
Overall, he expressed optimism about the future based on insights from the data collected so far this year. Demand from small and medium-sized businesses (SMBs) has rebounded significantly as businesses make better decisions regarding capital expenditures and future growth plans.
But “it’s still not at pre-COVID levels,” Shah noted. “Over the past two and a half years, we’ve had a lot of support from the government, which has led to a decline in demand, but we’re seeing it come back.
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