According to the Encyclopedia Britannica, Artificial Intelligence or AI is the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings.Due to its great impact on our world, many institutions, industries, and countries are exploring its implications.
Singapore, one of the world’s most innovative countries, is not one to get left behind in this seismic technological shift. It’s currently the legal and financial aspects of AI and developing guidelines on its use. The government has issued policy papers on the subject such as the “Principles to Promote Fairness, Ethics, Accountability and Transparency (“FEAT”) in the Use of Artificial Intelligence and Analytics in Singapore’s Financial Sector”. The said paper discusses generally accepted AI and data analytics utilization principles and the use of these principles in decision-making involved in the provision of financial products and services.
How will AI be used in banks, lending companies and financial institutions in Singapore?
In general, AI can be used by a licensed money lender and organizations under the banking industry and financial sector for the Know Your Customer process specifically for:
a. Customer profiling, demographics and psychographics
b. Making engagement with clients personalized to help build and maintain strong client relationships
c. Using available, up-to-date data to predict client needs and create products and services that will address these needs
d. Detecting market anomalies including market manipulation affecting currencies and securities
AI will be used to assess credit risk in loan applications. The aim is to streamline the loan process through automation and optimization. At the same time, the goal is to personalize lending experiences.
How is the Singaporean government supporting developments in AI?
The Monetary Authority of Singapore has an AI and Data Analytics (AIDA) Grant. This is part of the National AI Programme in Finance. The AIDA Talent Development Programme’s goal is to address the shortage of AIDA talent in 44% of the financial institutions. This need was identified in an informal survey by MAS in 2022 involving 131 local financial institutions. It aims to promote the adoption and integration of AIDA in financial institutions.
Basically, the AIDA Grant funds AI projects to help existing AI systems become more efficient. It was launched as part of the Financial Sector Technology and Innovation (FSTI) scheme under the Financial Sector Development Fund (FSDF). The FSTI scheme is valid until March 2026. It is open to small Singapore-based financial institutions, financial technology companies and industry consortiums.
The overall direction is to develop AI that can be used in risk management and improving customer outcomes within the financial sector. Under the AIDA, MAS will pay for project costs up to 30% of co-funding of qualifying expenses related to software, hardware, and professional services. The cap is at SGD $500,000.
How will this affect the Lending Industry?
Faster Loan Processing
Imagine not having to wait for days before having your loan application approved or rejected. When lending institutions can immediately pull up your credit history and financial behavior, they can easily make the decision and at the same time look for the product that will fit your needs, profile, and behavior. Algorithms can help in making these decisions bias-free. Lenders can input predefined criteria in the AI which will then reduce the decision-making time.
Loan Products That Better Suit Borrowers’ Needs
Imagine a loan product that is tailor-fit for you with terms that are specifically drafted based on your financial behavior. While automated loan payments that immediately deduct payment from your designated bank account are nothing new, what if lending companies can offer terms that will increase your chances of paying off your loan in a shorter time?
This can also mean new products with features that will motivate you to earn more and pay on time. AI can reduce the waiting time, improve efficiency, and create smarter options based on algorithms that can analyze data and predict if the borrower is trustworthy and creditworthy.
Improved Credit Score Calculation, Fraud Detection, and Market Trends Prediction
The capability of AI to analyze huge volumes of data can help it generate more accurate and updated credit scores. This will help lenders have a better picture of the borrower. It can even be used for fraud detection and can make the lending process more secure. AI can make sense of historical data to predict future market trends.
Improved Customer Service and Information Dissemination
Nowadays, customers expect information to be readily available and easy to understand. They also expect financial institutions to be available for questions 24/7. Thankfully, AI-powered chatbots can give customer support even at 3 in the morning. Lenders can create FAQs and even address questions regarding the application process or even offer financial advice.
This way, lenders can help borrowers make more informed decisions about interest rates, loan terms, and risk management by providing easily accessible and understandable information. This will also help improve customer experience and engagement.
Conclusion
While AI will undoubtedly create concerns about data privacy and cybersecurity, AI will revolutionize the financial industry for the better. So do not fear change. Instead, read up and learn more. Because in a few years, you can expect faster approvals, and customized products and services. More than that, you can expect better loan products that fit your lifestyle and financial behavior.