AI Opportunities for SMB Relationship Lenders

AI Opportunities for SMB Relationship Lenders

In a previous post, we discussed what is Artificial Intelligence, and how it relates to SMB lending. We honed in on the importance of properly framing your business problem, and avoiding common mistakes such as the “answer in search of a problem”. To summarize, there is not doubt AI is useful to address many well defined business problems and process inefficiencies. In many cases, AI provides a level of speed and complex logic to data analysis that would be near impossible to humanize. But developing a business strategy that depends on AI technology alone could be a high risk move, especially when it comes to credit unions and community banks. Enter the concept of Intelligence Augmentation (IA).

This blog focuses on the importance of human-technology interaction, and the fact that there are still many problems where AI technology alone won’t have an answer. Let’s start by taking a look at the example of Facebook.

Facebook has one of the world’s largest data sets, one of its largest technology teams, and likely its most sophisticated AI algorithms. Yet they still employ 30,000+ human content moderators to keep the content clean, safe, policy compliant – and legal. These people may perform jobs where AI makes them more efficient and effective, but they still remain at the center of many decision making processes that should not be left up to technology alone. (Obviously these days there is a very interesting side debate as to how effective Facebook has been and what its role should be in all of this – a platform for all or publisher with an editorial perspective?)

Now back to the more manageable business problem in the world of small business lending. At JUDI.AI, we see AI as a way to automate and streamline parts of the small business lending process. Data ingestion, organization, underwriting and a certain level of analysis can be automated, driving efficiency and enabling the use of previously untapped data sources, such as cashflow. But for community banks and credit unions, your superpower is that personal element of understanding the impact small businesses have on your community. Human intelligence and emotional elements such as excitement, empathy and fairness cannot be easily engineered into a system. This is a prime example where a strategic business model, involving “AI + Credit Data Science + People who really care” makes way more sense than a full dependency on AI technology. It is a situation where the concept of Intelligence Augmentation (IA), or the use of technology to supplement and support human intelligence, is a way better business option.

While the underlying technology may be the same for Artificial Intelligence and Intelligence Augmentation, the difference is in how it is applied 

Small business lending will always require some element of subjectivity to get it right. Applying local knowledge, judgement and expertise to interpret and make a final call on a small business loan application requires people that really get what is happening in their community. SMB loans are hyper local, highly dependent on specific geographic circumstances (like on a given block of a given street) and often turn largely on a single person’s involvement. No algorithm can detect when a wildly popular chef or maître d’ moves down the street to another restaurant.

Think of AI in the SMB lending world as “augmented intelligence” rather than as a silver bullet that will solve all problems at once. The opportunity here is for relationship lenders in credit unions and community banks to combine the automation and artistic side of SMB lending. You can use valuable automation, data analysis and insights to save time, lend more with less risk, and create deeper long-standing relationships by applying the technology and data science that large banks, fintechs and even large tech companies like Amazon and Shopify have. We live in a time where technology costs have dramatically reduced, and fintech companies have made advanced technology solutions that were once only accessible by large banks – easy to implement and use.

Relationship lenders – community banks and credit unions – can (and should) be the “last mile” of small business lending, with the best of all worlds – technology, data, local knowledge and deep relationships. There is a big opportunity here. At JUDI.AI we are committed to helping enable it. If you are interested in a deeper discussion on intelligence augmentation, artificial intelligence and SMB lending, reach out to us anytime.