20 September 2023
AI IN LENDING: COMPETITIVE ADVANTAGE AND COMPLIANCE
Discover how the collaborative efforts of Capco and SolasAI team up to detect and mitigate AI lending model bias, optimizing results while ensuring compliance.
This piece is in partnership with SolasAI ahead of our upcoming joint webinar AI for Lending Webinar: Competitive Advantage & Regulatory Compliance on Wednesday, September 20. For more information or to register, click here.
As organizations worldwide harness the power of AI to gain a competitive edge, they must also navigate an intricate landscape of evolving regulations and ethical considerations. The expectations of governments, regulators and consumers are rapidly focusing in on the need to test and justify model fairness to prevent the harm that AI-generated algorithmic discrimination would have on the global economy and on everyday lives. Against this backdrop, compliance is a crucial consideration within the innovation process that adds significant value to AI-powered companies.
What is algorithmic bias, and why is it such a concern in AI? Let’s examine home loans, as an example. AI can help lenders decide who qualifies for a mortgage by analyzing certain variables, such as prior delinquencies. As the AI learns from the data, it adjusts its calculations to reach the most statistically accurate prediction. When this process works fairly, banks can provide more loans without increasing risk, and consumers can be charged lower interest rates.
But numbers aren’t always neutral. For example, the data (or sometimes the lack of data) that go into some credit scoring systems have been criticized for amplifying racial bias, especially against Black Americans whose loan histories are disproportionately impacted by a history of discrimination. A survey of 5,000 adults found that more than half1 of Black Americans reported having a low or no credit score, compared to 41% for Hispanics, 37% for whites, and 18% for Asian Americans. The legacy of past discrimination is baked into the data — regardless of the intentions of the model’s developers.
One of AI’s main capabilities is the ability to find subtle patterns in data and extrapolate them into actionable judgements. However, when the data that the AI uses to solve tasks is tainted by discrimination, it can inadvertently amplify that discrimination and crystallize it into a real-world policy that hurts people and breaks the law. The technology still needs a human observer, such as a compliance officer, to discern whether the AI causes a disparate impact. SolasAI, the leader in innovative algorithmic fairness AI software, helps companies utilize the least discriminatory alternative and demonstrate that they have made reasonable efforts to minimize disparity and bias in decision-making algorithms.
AI and other learning algorithms have the potential to positively or negatively impact business, customers, society and our planet. When it comes to steering AI to be a force for good, it will be crucial to proactively pursue compliance functions equipped with the right tools and knowledge to ensure trusted, transparent and viable applications of algorithms and their associated automation.
Proactive compliance can happen fast enough to match the speed of innovation in generative AI. As an example, Capco partnered with SolasAI, the leader in innovative algorithmic fairness AI software, to accelerate the time to reach compliance for unbiased, production-grade AI models regardless of scale. Previous compliance efforts took weeks to navigate from start to finish; now, businesses can meet and clear regulatory standards within a few days. Read more about that partnership below.