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Artificial Intelligence to Check Creditworthiness for Discover Personal Loans

[Tuesday, April 2nd, 2019]

Introduced in 1985, American financial services company Discover Financial Services, Inc. is currently best known as a credit cards issuer and is the third largest payment network in U.S. after Visa and Mastercard. In addition to cards Discover offers savings and checking accounts, personal loans, student loans and home equity loans.

Despite the stable position of Discover, it is known to bear great losses from unpaid personal loans. The lender has already toughened one’s position on the requirements for borrowers, but this did not help avoid all losses.

New Partnership to Predict Losses

Recently Discover announced their partnership with ZestFinance – an artificial intelligence (AI) company founded by Google’s former CIO and creating software for finance companies since 2009.

AI can help increase approval rates and predict losses better than human underwriting decisions. It is supposed to determine more accurately whether to issue a loan or not, and thereby secure the bank from losses because of borrowers’ insolvency or bankruptcy. ZestFinance will also be able to reduce the number of scammers with fake personal information.

To solve this issue Discover is to use Zest Automated Machine Learning or ZAML – the machine learning credit and risk modeling solution. The new method will be put into practice starting from the second half of 2019 to estimate prospective borrowers who apply for personal loans.

“Discover is a leader in the financial services industry with the vision to make machine learning core to their business. Using machine learning responsibly means deploying accurate, explainable and fair models,” ZestFinance founder and CEO Douglas Merrill said in an interview to The Wall Street Journal.

“Banks that fail to invest in machine learning will end up fundamentally uncompetitive in a couple of years. We found the best way to drive benefits faster was to complement our internal efforts with a partnership with Zest,” said Roger Hochschild, CEO and president of Discover.

What Is Artificial Intelligence to Bring Consumers?

We all know about the significance of having a good credit history and credit score. Currently, lenders request credit reports from credit bureaus before making a decision on your application. But they will be gradually moving to considering some more factors, including information on utility payments, shopping history and even social networks habits, which becomes possible due to artificial intelligence.

Since the first step has been taken and AI is obviously going to assume ever greater importance among lenders, it is more likely to affect your future receipt of not only loans, but credit cards too, as lenders aim to decrease risks. The applications that indicate too big income or the full legal name of the employer as well as applications received via Internet telephone services will be considered the most potentially risky.

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