The terms of the next loan you get might depend less on your credit score and more on what a computer program thinks of your habits.
National Public Radio reports that digital lending is expected to double in size over the next three years, reaching nearly 10% of all loans in the U.S. and Europe. There are now some 2,000 digital startups, many of which are using artificial intelligence to analyze the troves of data created every day.
But government regulators are struggling to keep up with the pace of change.
Marc Stein, who runs Underwrite.AI, writes algorithms capable of teaching themselves. This is called machine learning, a type of artificial intelligence.
“Shop at Amazon, and they use a form of machine learning. That’s how Amazon’s recommender system works,” he says.
The program learns from each correlation it finds, whether it’s determining someone’s favorite books or if they are lying about their income on a loan application. And using that information, it can predict whether the applicant is a good risk.
