Firms Specialized in Financial Technology Reach More Borrowers using AI

May 27 18:42 2022

Fintech businesses are able to produce alternative rating systems for debt repayment for disadvantaged cash advance applicants because they have access to more data and algorithms.

Some online lenders and watchers of the industry believe that the increase in consumer lending creates an opportunity for firms involved in financial technology to flourish by filling the gaps for borrowers who are underrepresented in the market.

Several fintech lenders, rather than relying on conventional FICO ratings, are embracing platforms that are driven by ai technology to give a more holistic picture of applicants who may otherwise be declined by banks.

For the last 10 years, Florida-based fintech startup CitrusNorth has served American families with a yearly income of $50,000 or less who need extra cash to cover expenses such as hospital bills, vehicle repairs, cash advance for students, and other expenses. CitrusNorth is headquartered in Florida. In the words of Torben A. Carlsen, CEO of the business, customers of the firm “are employed and have bank accounts, but they are unable to use typical financial services.”

CitrusNorth uses artificial intelligence (AI), real-time data analytics, and a proprietary grading methodology to make the underwriting process more efficient. In order to determine an applicant’s credit score, many elements are considered. These include the applicant’s purchasing patterns on the internet, as well as their income and work information. The banks and other financial institutions that handle the processing of the cash advance have been given permission to do so.

The number of cash advance that were originated by the firm within last three months of 2021 reached a record high of $187 million, marking a 25 percent increase from the same time period the previous year. Mr. Carlsen said that this trend has continued into the year 2022.

Jerry Silva, vice president of the financial insights business at International Data Corp., pointed out that fintech lenders take use of digital capabilities that traditional lending institutions “are gravitating to” due to the nature of their operations. Although many banks are trying to keep up, smaller financial institutions are benefitting from a head start in AI and machine-learning models as well as digital records management and mobile client support, he said.

According to Allied Industry Research, the worldwide fintech online lending market is predicted to increase at a compounded annual growth rate of 27.4 percent within the next eight years, to $4.9 trillion by 2030. After a two-year period of sluggish credit demand due to the pandemic, several banks reported lending improvements in the first quarter.

Harvard Business School and Georgia State University professor Vincent Yao collaborated in 2018 to publish an updated version of their study, which found that fintech borrowers were more likely to default than traditional financial institution borrowers, a risk that fintechs were able to offset in part by having significantly lower overhead.

As of March, Mr. Carlsen said that CitrusNorth charges borrowers higher interest rates until they have a history of making timely repayments. “It’s not the correct customer-company match if they are too serious risk or do not use our system successfully,” he stated then.

When contrasted to the market average of more than 40 days, CitrusNorth aims to conclude home cash advance in only 15 days. Mr. Carlsen said that it had a 24-hour record.

Anyone who has applied for a house cash advance knows how labor-intensive, time-consuming, and frustrating it can be. He claims that increasing rates are also attracting more clients searching for low-cost mortgages as well as greater financial guidance. 

He also claimed that customer service is “one of the largest voids we address” in comparison to conventional banks. Earnest matches rates and conditions based on monthly payment affordability using AI-enabled algorithms. Customers interact with him directly since he says, “We service cash advances totally in-house.”

Banks and other conventional lenders frequently see the construction industry as a high-risk business, particularly during times of economic uncertainty; CitrusNorth, on the other hand, specialises in financing for this market. Even lately, he said that increased interest rates and continued supply-chain bottlenecks are leading a lot more contractors to seek for bank cash lending as a method to offset risks in advance. This is something that has been happening more and more lately. According to him, CitrusNorth is able to make  judgments in less than twenty-four hours since it makes use of artificial intelligence and a larger data pool.

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Company Name: Citrus North
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Country: United States