Artificial Intelligence Aids Consumer Lending, but With Risks

Artificial intelligence (AI) and machine learning (ML) are increasingly deployed in credit and risk functions at financial institutions, enabled by greater data availability and affordable computing capacity, Fitch Ratings says. AI/ML can improve operational efficiency and analytical outcomes but carries risks of ‘black box’ decision-making and data, as well as programming deficiencies and biases, as discussed in our report, What Investors Want to Know: Artificial Intelligence and Financial Institutions. Regulation and internal governance can help reduce these risks. Financial institutions use AI-based systems and ML to improve predictive models in operational risk management, including fraud detection, stress testing and provisioning, as well as credit assessment applications, such as credit scoring for loan underwriting and monitoring the performance of existing assets.

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