This 2.0 Guide is intended to show the state of Artificial Intelligence (AI) and how it powers lending in the U.S. It should also offer some perspective about why using AI-powered lending is necessary for credit unions to compete with fintech and big bank lenders in the next few years.
AI is, at this time, a collection of various machine learning (ML) algorithms that improve themselves over time as they encounter more data. While AI can be used for any number of products and services, more and more financial institutions are turning to these algorithms to aid in better lending practices.
While exact results at this stage will reflect individual vendor outcomes—or individual credit union outcomes with specific vendors—the aggregate so far is clear:
AI improves the lending process top to bottom. More loans approved. Less risk. Fewer defaults. Faster decisions. Personalized offers. Reduced fraud. The list goes on.
Credit unions can work with fintechs and CUSOs to establish or expand their AI portfolio. As of 2023, CU 2.0 is unaware of any vendors that provide AI-powered loans for every loan type, but some market leaders are getting close. In the meantime, it may be valuable to work with more than one vendor to meet different needs. Read on to learn more.
AI Member Service Trends and Statistics
The following trends and statistics paint a picture about where AI fits into the world of lending. This includes automated, AI-powered decisioning, which leads to more approved loans with better terms and less risk. However, there’s a lot more to AI-based lending than that!
Trend 1: AI credit decisioning.
Although they’re generally on the reliable side, FICO scores are a relatively poor indicator of creditworthiness. People with limited or no credit history are unfairly penalized even if they’re clearly capable of paying. Other people have high scores despite sitting in precarious financial situations.
AI-powered credit decisioning often goes beyond FICO to assess creditworthiness. Rent or utility payment history, relationship with the lender, and income can all inform credit decisioning. AI improves the following credit decisioning areas:
- Credit qualification, ensuring that more applicants are approved for loans based on available data;
- Limit assessments, letting lenders safely borrow higher amounts without incurring more risk; and
- Rates and terms, which, due to more accurate credit qualification and risk assessment, are often more competitive than traditional, non-AI-powered loans.
Additionally, because AI is all-digital and can be entirely automated, decisions are faster and cheaper, allowing credit unions to scale their operations without adding staff or increasing approval times.
Trend 2: Improved member experience.
Digital lending, especially when conducted in online banking or through an app, is significantly more convenient than any process involving in-branch visits, conversations with other humans, and paperwork—whether that be real paper or a PDF. Email is a scant improvement over snail mail when it comes to loan applications.
Around 70% of loan applications come in between the hours of 5pm and 9am. In part, this is because it’s hard for working people to complete lengthy loan applications during working hours. But it also indicates a need to meet loan demand at all hours.
Lending solutions that employ AI can often allow members to go from application to funding in around a minute, give or take. Many AI lending solutions can accept loan applications directly from members at any time, assess risk, make a decision, and fund the loan long before doors open the next day.
Trend 3: Increased scalability.
AI is faster, more accurate, less risky, and requires less human input than traditional methods today. These are the early days of AI.
AI will continue to improve, drastically outpacing improvements from any traditional methods. AI could soon power every loan available, reducing the need to extensive lending staff. And, due to its symbiotic relationship with data—data that credit unions generate more of every day—AI will be able to assist with marketing, cross-sell, and highly personalized offers.
Not all AI-powered lending vendors use AI in the same way, nor do all assist with the same types of loans. For example, some fintechs specialize in smaller, unsecured consumer loans. Others power SMB lending strategies.
These are a few things you may want to consider when evaluating potential partners:
Can the solution accept applications, assess risk, make a decision, and fund without human intervention?
Will the solution allow your credit union to approve more loans with less risk? Will it improve your decisioning speed and accuracy?
Member acquisition and onboarding
Can the fintech accept loan applications from eligible borrowers in your field of membership and convert them to members?
Marketing and personalization
Can the vendor review member data—such as credit and transaction history or life events—to present relevant and contextual offers at optimal times?
Does the solution allow members to resolve their issues without involving the credit union or contact center?
Connections and integrations
Does the solution require extensive time to set up, deploy, and optimize? Is it tied to a specific core? Can it integrate easily with your tech stack, or will you need bespoke connections?
Servicing and collections
Can the fintech predict delinquencies and send reminders? In the event that a member defaults, can the solution offer automated collections options?
Regulators (such as the CFPB) require that the reasons for a decision be made available. It’s unlikely that AI models from leading fintechs (or those in this list) would fail any explainability criteria, but it’s worth asking.
AI Lending Fintech Ratings, Part 1
Part 1 of our AI Lending fintech ratings is about how each fintech in the guide works with credit unions. Do they compete? Do they sell services to credit unions at rates that maximize their profits but are hard on CU budgets? Do they share profits or marketing effort with credit unions?
We address these issues with our “Eat Your Lunch,” “Sell You Lunch,” and “Share Lunch With You” ratings in our downloadable PDF guides.
AI Lending Fintech Ratings, Part 2
This section of our fintech ratings introduces AI lenders along with a brief description of what they do. We also attempt to rate each provider on two simple variables (outlined below).
CU 2.0’s rating methodology for our early guides is very simple. We measure the potential impact of working with each fintech on two variables: Impact on Lending (types of loans affected, ability to market or collect, etc.) and Member Experience (ease of application, banking experience, etc.).
0: N/A or no impact. Competes with or disintermediates credit unions; doesn’t offer relevant services.
1: Minimal impact. Limited partnership opportunities; limited or narrow lending use cases.
2: Moderate impact. Partners with credit unions but may require more resources; meets at least one or several common loan needs.
3: Major impact. Partners well with credit unions and doesn’t require much resource or investment; meets or exceeds most loan needs seamlessly.
Our impact ratings don’t necessarily correlate to the quality of a given solution. Fintechs with higher potential impact scores aren’t automatically better, or a better fit, for your credit union and members.
The following fintechs are listed alphabetically. These ratings correspond only to the two listed variables (Credit Union Impact and Member Experience). These aren’t ranking of quality, nor are they recommendations—they’re meant only to serve as a starting point in your research to improve your credit union’s lending strategy.
These ratings are unique among our guides because we believe that all solutions offer significant ROI and scale potential over traditional chat and member service options.
Trusted solutions feature an asterisk by their names—these are fintechs that CU 2.0 has vetted personally.
|Fintech||Description||Lending Impact||Member Experience|
|Braviant Holdings||Braviant Holdings’ digital lending platform uses AI to offer credit according to a borrower’s ability to repay.||0||2|
|Clutch*||Clutch uses AI to put memberization, origination, and recapture on autopilot.||3||3|
|JUDI.AI||The JUDI.AI platform uses AI to enhance credit unions’ small business lending and analytics offers.||2||2|
|OppFi||OppFi uses AI to make consumer loans, especially those with debt, bad credit, and with limited access to opportunity.||0||2|
|QCash*||QCash is a CUSO that uses AI to automate small-dollar loans for member emergencies and improve their cash flow.||2||2|
|Quilo*||Quilo’s AI allows credit unions to offer instant installment loans and point-of-sale lending for credit unions—alongside their liquidity and loan syndication offers.||3||3|
|Scienaptic*||Scienaptic is in the business of helping credit unions say yes to more loans with confidence using AI.||3||3|
|SoFi||SoFi uses AI to offer all types of consumer loans, refinances, credit, and more.||0||3|
|Turnkey Lender||Turnkey Lender offers an AI-powered loan origination and lending platform for banks and credit unions.||2||3|
|Upgrade||Upgrade uses AI to capture consumer loans and sell them to credit unions, including personal loans, credit cards, and auto refinance loans.||1||1|
|Upstart||Upstart uses AI to capture consumer loans and sell them to credit unions, including personal loans, credit cards, and auto refinance loans.||2||1|
|Zest*||Zest’s AI offers better, faster, fairer lending across the credit spectrum, helping you safely say “yes” to more members without increasing risk.||3||3|
Please be aware that many lenders may use AI in parts of their lending or service process but either a) refrain from publishing that information, or b) prefer not to position themselves as an AI company. Out of respect for these considerations, we’ve omitted a handful of solid fintechs/CUSOs.
Please also note that these ratings are in their early stages and will be updated as we include more data and more complex variables. The ratings are not definite—your credit union could see a different level of impact than listed in this guide.
Did we miss a fintech? Please let us know at [email protected]
Choosing the right partners to leverage fintech lending capabilities and efficiencies will depend on your goals, budget, timeline, and other factors. CU 2.0 can help in the following ways:
- Join our Fintech Call Program. In quarterly 30-minute calls, we’ll discuss in depth new and innovative fintech solutions that fit your credit union’s needs. We can also help you review other solutions you’re looking at.
- Ask for an introduction. We maintain relationships with most or all of the vendors rated above. We would be happy to give you a warm introduction to any we can on the list.
- Book a consultation. CU 2.0 offers technology and fintech consultations and reviews to identify best-fit solutions for your credit union.