Innovation In Lending

When You Make More Loans, Everybody Wins

Zest AI team
September 22, 2022

It’s like “the circle of life” for credit unions. Your credit union exists to serve its members. However, to serve those members, your credit union must also generate revenue. It does that, in no small part, by making loans to those members, thereby providing them with an important financial service. And so the circle completes.

We all know that the key to longevity in financial services is growth. So how do you grow your business? Or put another way — how do you widen this circle and serve more members? The simple answer is: You make more loans.

In the past, if you wanted to “make more loans,” you ran some sort of marketing campaign. Assuming the campaign was effective, this inevitably resulted in an uptick in the number of closed loans. What it likely didn’t change, however, is the ratio of closed loans to loan applications. In other words, no matter how effective your campaign, because you still relied on the same outdated underwriting models, you were still saying yes or no to the same members.

It's as easy to spot a very bad risk as it is to spot a very good risk. But what about those members whose credit reports put them in that gray area? Most certainly you’ve been saying no to some members who would have gone on to establish spotless repayment records. If only there was a way to dig deeper on each applicant and uncover these diamonds in the rough.

Luckily, now there is.

Of course, we’re talking about artificial intelligence-driven loan underwriting. Simply put, AI can instantly evaluate hundreds of data points on every loan applicant, providing you with a much more accurate assessment of the risk that each applicant represents. The net result is that you approve more loans (i.e. serve more members) without increasing overall risk to the credit union. In other words, you make more intelligent decisions.

Common Misconceptions About AI

If you think AI isn’t for your credit union, maybe you’re hindered by some common misconceptions.

1. We Can’t Afford AI

A few years ago, that was absolutely true. A powerful AI-based system required loads of expensive hardware and a six or seven-figure investment. Fortunately, the cloud has changed all that. Cloud delivery dramatically reduces costs for AI providers and allows them to scale their solutions up — and down — as needed. When you consider the bump in loan approvals, today you can’t afford not to implement AI-based underwriting.

2. Our Members Have Different Needs From Other Credit Unions

That’s the beauty of AI. Because these systems are flexible and “intelligent,” they can be tweaked according to your credit union’s specific needs. Even more important, they continue to “learn” as time goes by. The amazing system you implement today will perform even better a year from now, and even better a year after that.

3. These Big Companies Don’t Care About Credit Unions

We can only speak for Zest AI, but here, nothing could be further from the truth. In fact, maybe you didn’t know it, but Zest AI is a CUSO. That’s right. We not only sell to credit unions, but they also have ownership in the company. We’re committed to bringing AI-based underwriting to as many credit unions as possible and ultimately improving as many members’ lives as possible. That’s part of the reason NACUSO named us New CUSO of the Year in 2022.

Still think AI-driven underwriting isn’t for your credit union? Think again. This is truly transformative technology — for your credit union and for your members.

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