How AI is Transforming Retail and Mortgage Lending

By Adam Lieberman, Chief AI Officer, Finastra

Artificial Intelligence (AI) is revolutionizing various industries, with retail and mortgage lending being no exception. The integration of AI into the lending process is not only enhancing efficiency but also transforming the way lenders interact with customers, manage risks, and streamline operations.

In Finastra’s State of the Nation Survey 2024, 100% of markets globally showed increased focus in Generative AI (Gen AI) on IT operational gains, while 61% of financial institutions noted that they have recently adopted AI or improved their capabilities. This is a notable and obvious upward trend, highlighting why banks and credit unions have an opportunity to embrace this technology where they see fit.

As we analyze the overall impact of AI on retail and mortgage lending, here are the key areas where it is making a significant difference.

A Future Powered by Generative AI

Gen AI, a subset of AI that creates new content by learning patterns from existing data, is ushering in a new era of intelligence. AI technology has been around since the 1950s, however, it is now more democratized, with people knowingly and enthusiastically interacting with AI-based systems. This widespread comfort with this technology is ultimately making its way into the workplace.

This technology is being leveraged in retail and mortgage lending to perform tasks that were previously time-consuming and labor-intensive. For instance, AI can now generate reports, analyze data, create content, and even assist in software development.

Enhancing Efficiency and Reducing Costs

One of the most significant benefits of AI in retail lending is its ability to enhance efficiency and reduce costs. AI-powered tools can automate routine tasks, allowing employees to focus on more complex and critical activities.

For example, AI has the potential handle initial loan screenings, income verification, and even some aspects of retirement planning. This automation not only speeds up the lending process but also reduces the cost to originate loans, which is a major concern for lenders. When deployed properly, AI can help reduce the cost to operate by enabling lenders to process more applications with less overhead, without compromising quality. This empowers team members to focus on strategic priorities.

Lenders can also utilize internal AI assistants, which help bridge the knowledge gap. Finastra’s LaserPro, for example, offers users an AI assistant that applies Large Language Models to the company’s extensive knowledge base to answer specific questions, helping to ensure compliance while saving employees time.

Improving Customer Experience

Thanks to efficiency gains, the customer experience can be front and center in a new way. With AI-powered chatbots and virtual assistants, lenders can provide 24/7 support in multiple languages, ensuring that customers receive timely and accurate responses to their queries.

Additionally, AI can automate balance inquiries and preapprovals, making the lending process more seamless and convenient for customers. The integration of AI into customer support systems not only enhances customer satisfaction, but also frees up employees to focus on more personalized interactions.

Risk and Fraud Detection

AI's ability to analyze vast amounts of data quickly and accurately makes it an invaluable tool for risk and fraud detection in retail lending. AI can identify patterns and anomalies that may indicate fraudulent activities, helping lenders mitigate risks and protect their assets. This proactive approach to risk management is crucial in an industry where security and compliance are paramount.

The Future of AI in Retail Lending

The future of AI in retail lending looks promising. As AI technology continues to evolve, its applications in the industry will expand. Many industry experts have made bold predictions in this space, noting that a future which automates the underwriting process for many loans is possible. This shift allows team members to focus on customer interactions and deal structuring, enabling the redeployment of human assets to areas where they can add the most value.

AI is transforming retail lending in profound ways, from enhancing efficiency and reducing costs to improving customer experience. As lenders continue to embrace AI technology, they will be better equipped to navigate the challenges of the industry and provide superior services to their customers. The integration of AI into retail lending is not just a trend; it is a fundamental shift that is reshaping the future of the industry.