Speed still matters — even in an economic downturn

Zest AI team
October 30, 2023

The state of the world around us makes a huge impact on lending decisions. When we see turmoil and feel uncertainty in the air about the stability of the US economy — or even the world economy — lenders tend to limit their willingness to make loans for folks outside of that A to A+ tier of credit.

A luxury that consumers with A-tier credit have is the assurance of a loan and plenty of choices as to where they get that money from. This is still a market that lenders need to compete in, and if we’re looking at the big picture here, we actually recognize that this is one of the most competitive markets that a lender could be in. 

So, how do lenders compete during an economic downturn? By beating other lenders to the loan with faster decisions through AI-automated underwriting.

The first, best offer usually wins 

Speed is often the top factor in auto loans, where dealers and borrowers are deciding in a matter of seconds.

Even in good times, speed and accuracy have always been the primary benefit of ML. Usually, automating credit underwriting is pitched as a money-saving move since having AI make a yes or no decision on credit applications requires fewer human touch points, which means a lender can staff underwriting teams more efficiently. But that’s not why lenders have been moving to ML automation. They do it to meet their customers’ need for speed.

With auto loans, we know that speed is often the top factor in who gets to make the loan. Dealers and borrowers make a decision in a matter of seconds. It doesn’t matter whether a better interest rate is out there if they have to wait — even if that wait lasts just a few minutes. In the current economic environment, this can hurt. Americans, on average, own their longest-kept cars for about eight years, and that amount of time tends to go up as car prices surge, so expecting new car loans is a shot in the dark for now.

No need to compromise accuracy for increased efficiency

As lenders evaluate AI underwriting for faster lending decisions, they’ll notice that some financial institutions working with Zest AI can auto-decision 80 percent of their borrowers in seconds. That’s right, AI loan underwriting is that powerful.

However, speed should not compromise accuracy, as there is a growing concern about AI being compliant with fair lending laws. Zest AI credit underwriting models improve the accuracy of risk prediction by analyzing thousands of data points, connecting trends to garner insights into a borrower’s credit profile that traditional models might miss. Through this approach, Zest AI clients see over a 20 percent increase in approvals without adding risk. More importantly, clients see a 40 percent lift in approvals for protected class status individuals. Smart lending decisions can be made more inclusively and efficiently.

AI credit decisioning is reliable, fast, and explainable. Using AI technology like Zest AI’s allows lenders to build confidence in automation and focus manual underwriting on more complex cases — ultimately leading to a better underwriting experience and higher customer satisfaction. Accuracy, inclusion, and speed all matter, even in a harsh economic climate, because when you deliver quickly and consistently, you win more customers in the long run.

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