AI Credit Scoring – a New Future for SMEs
While small and medium enterprises (SMEs) are a substantial force behind economic and innovation growth, their access to finance is often limited. Often, SMEs have risky business models, lack in-house finance expertise, are low on collaterals, and they lack data such as credit history and transaction records which are necessary for the banks to grant them loans. This means their growth is hampered as they lack much-needed financial help. This is one of the issues many governments and the private sector are trying to solve.
One solution is finding a way financial institutions can make sense of SMEs’ scattered informal information and other non-financial information even though it is not audited by a 3rd party. With the help of AI and Machine Learning technologies, such data can be turned into credit scores to make the risk assessment process more accurate and holistic. This will help provide more data for banks when it comes to granting loans and improve capable SMEs’ chances of accessing the financial help they need.
For example, the startup TALA gathers user data from smartphones, including locations, SMS and call records, and uses Machine Learning (ML) techniques to analyze and calculate their credit scores. Another startup, GiniMachine, uses the same technology to design credit scoring models for banks using their historical lending data. Meanwhile, traditional credit-related companies like FICO and Equifax have also started to integrate AI and ML into their systems to increase the efficiency and accuracy of their credit scoring.
Although AI and Machine Learning technologies enhance existing credit scoring methods, more innovation is still needed to solve other financial barriers that SMEs face. Once this happens, SMEs should see more growth, generate more employment and enjoy a better quality of life and this, in turn, will boost the overall growth of the economy.
If you are a FinTech Startup in Credit Scoring or technologies that can help support other SMEs, don’t miss out on the chance to join Bangkok Bank InnoHub Season 2 where you can further develop your innovation to achieve success.
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