How Artificial Intelligence Is Reshaping Loan Applicant Verifications

In an industry that has embraced technological evolutions, lenders and their dealer partners are turning to Artificial Intelligence (AI) to enhance operations. One critical area where AI is proving to be indispensable is in applicant verifications. As lenders strive for greater efficiency, accuracy and risk management, leveraging AI in the verification process has emerged as a strategic imperative.

Manual loan verification document processing is time-consuming. The verification process includes proof of residence, identity, insurance and income. It can be prone to human error due to the repetitive tasks.

Even in a flat auto market, the challenges in verifying loan applications persist for auto lenders and dealers. Embracing technological advancements, collaborating with industry experts and prioritizing customer experience can collectively address these challenges, leading to a more efficient and secure loan verification process.

A growing number of online platforms facilitatesthe distortion of information on auto loan applications, presenting a challenge for the industry. Dealers, driven by the urgency to clear inventory, and lenders, keen on extending loans to potential auto buyers, often struggle to detect inaccuracies in many submitted applications. Statistics indicate that approximately 30% of applicants provide false information regarding their incomes while applying for auto loans, making it one of the fastest-growing forms of fraud today.

In an era of constant innovation, staying adaptive and proactive is key to overcoming the hurdles in this changing landscape of auto lending.

How Does AI Improve Loan Applicant Verifications?

AI and machine learning (ML) are increasingly being utilized to more accurately verify loans. Utilizing ML and automation, advanced AI technologies offer a software resolution accessible round the clock. This solution adeptly performs precise calculations without loan bias and clears stipulations in less than 30 seconds.  This approach stands in contrast to the typical seven-day duration required for loan verifications, showcasing the remarkable speed and reliability of the AI-driven approach.

 Offering a 99% accuracy level and assured service rates, lenders and dealers can divert their attention away from legal and regulatory items, concentrating instead on fostering strong customer relationships. Sophisticated AI technology extends far beyond simple image recognition (OCR), identifying defects and omissions while delivering valuable insights. Furthermore, it empowers automated loan processing capabilities, allowing lenders to onboard a greater number of loans with greater accuracy, adhere to regulatory mandates and maintain readiness for audits.

Harnessing Technology for Data Extraction

 These leading AI verification solutions extract and categorize data from various documents such as driver’s licenses, paystubs, W-2 forms or bank statements. The technology furnishes the necessary fields for consumer verifications critical in determining the lender's decision to approve the loan. By ensuring precise income calculations and validating applicant data along with loan documents,  loan processing time is significantly shortened. This streamlined process results in heightened accuracy, reduced human errors and fraud risks, and increased operational efficiency. Ultimately, this contributes to an enhanced experience for consumers, lenders and dealers .

 To categorize and identify necessary information for validating data in alignment with a lender's funding rules, AI solutions employ a set of proprietary rules, heuristics, text-based and image-based neural networks, and various statistical models. Lenders utilize these models as a pivotal step before arriving at a final decision.

With AI solutions, lenders achieve automation at scale efficiently, while reducing costs. The solutions also reduce manual processes, support compliance and quality, mitigate risk and deliver significant cost savings.

Risk Assessment Modeling

 Utilizing AI, lenders can customize their risk assessment models according to specific parameters and criteria that are pertinent to their customer base. This tailored approach guarantees that the evaluation process aligns precisely with the distinctive risk landscape of each lender. As a result, lenders gain the ability to fine-tune their loan portfolios, aiming for sustainable growth.

The integration of AI into applicant verifications represents a pivotal shift toward greater efficiency, accuracy and risk management. By harnessing the power of machine learning, lenders can make more informed decisions, streamline operations and stay ahead in an increasingly competitive market. As technology advances, the synergy between AI and financial services will redefine the future of auto lending, unlocking new possibilities for lenders, dealers and applicants.

Adine Deford (pictured, above left) is vice president of marketing at Informed.IQ, an AI fintech serving the financial services industry.