How Machine Learning Is Changing Digital Lending
Artificial intelligence and machine learning are two technologies that have been growing in sophistication for a number of years now. The potential capabilities of modern machine learning algorithms are truly staggering. It is these algorithms that underpin a diverse range of technologies, including driverless vehicles, and enable computers to not only learn but to teach themselves.
There are a great many different problems that machine learning could potentially solve, and we are only just beginning to scratch the surface of what we might be able to tackle by using this modern approach. Machine learning algorithms have enabled us to turbocharge the efficiency of artificial intelligence and have meant that we can now train AIs to do things that we ourselves do not fully understand.
Of the many applications of machine learning, it is increasingly being used to provide security for financial institutions and help them identify fraudulent transactions automatically. Not only can machine learning identify fraudulent loan applications, but it can also be used to trace money through the financial system when attempts are made to hide it.
In short, machine learning has completely changed the way that financial institutions approach digital lending and has enabled them to lend money with more confidence in their fraud prevention methods.
Whether you are applying for a mortgage or a payday loan, like one of these 24 cash loans from BingoLoans, there is a number of criteria that will be used to assess whether you are a worthy creditor or not. naturally, your previous financial history will be considered. This is something that a human user can look through easily enough.
In assessing your financial history, credit lenders are looking at your previous character. In other words, they want to know whether you have kept up with previous repayment obligations. They will also look at the current amount of capital you have access to and will sometimes consider what collateral you have available if the loan justifies it.
The more data points that these businesses consider, the more accurately they can assess each applicant and decide whether they are worth lending to or not. However, that more data points that there are, the more work is required to look through them and identify any patterns that might exist. On the other hand, a machine learning algorithm that has been trained in how to spot suspicious patterns in financial histories will be able to accurately sift through all this data much faster than a person ever could and with similar or greater accuracy.
How Does It Work?
Computers are essentially very powerful calculators and are, therefore, excellent at solving certain types of problem. However, in order for a computer to solve any problem it has to be shown how to solve ut by a human. This means that unless we ourselves know how to formulate the problem in the language of a computer, we have no way of writing a piece of code that will tell a computer how to solve it.
However, machine learning has changed this dynamic somewhat. By utilising neural networks that are able to learn over time, we are able to train algorithms that are then able to formulate their own solutions.
For example, if you want to train a machine-learning algorithm on how to spot cars, you give it a huge database of photos, some of which are cars and some of which are not. By telling the algorithm which are the correct answers and which are not and by feeding it enough raw data, we can have the algorithm learn how to differentiate between a car and not a car.
Needless to say, the machine learning that underpins autonomous vehicles is considerably more complex than this. However, the basic principle is the same and remains the same for all implementations of the technology no matter how complex.
In the case of financial lending, machine learning algorithms are shown large databases of financial transactions, some of which are suspects and others of which are not. The machine learning algorithm learns how to spot patterns in the vast amounts of financial data and can cross-reference as many data sources as it is given in order to identify potentially fraudulent applications.
Is It Accurate?
Machine learning algorithms have the potential to do things that humans would find impossible. They also enable us to teach machines how to do things that we don’t know how to teach them. However, while both of these implementations are very powerful in their own right and enable us to solve many problems, they are not entirely accurate.
The accuracy of machine learning algorithms has been often impressive, especially when you consider that these algorithms have essentially trained themselves. Rather than entirely outsourcing decisions to machine learning algorithms, most financial institutions are instead using them to monitor data and flag up any potentially fraudulent activity. Once this potential activity has been brought to the attention of a human, it can then be checked and pursued if necessary.
One of the most significant limitations of machine learning technology is that it can only ever be as good as the raw data that is used to train it. In other words, if there are any biases or inaccuracies in the underlying data, the final algorithm will suffer accordingly.
As we mentioned above, the quality of the data used to train a machine-learning algorithm can limit its ultimate effectiveness. However, this is just one potential limitation of machine learning technology. As machine learning becomes more prevalent in our daily lives and begins to make more decisions for us and the businesses around us, it is important that we understand both the advantages and disadvantages of this approach.
One significant problem with using machine learning algorithms to make financial decisions is that in order to prevent discrimination, governments require that lenders provide sound arguments for rejecting a loan application. There is no way of ascertaining how a machine learning algorithm comes to the decisions that it does, and therefore, there is no way of explaining its decision.
Machine learning algorithms enable us to tackle problems that would have previously been insurmountable for our computers. Among the many applications of machine learning that are appearing all around us, it’s use as a guardian of our financial system is one of the most promising. A machine learning algorithm will be able to analyse data far more quickly than a human could ever hope to and can still draw accurate conclusions from it.
Machine learning is changing the way that a number of businesses operate, and digital lenders are just one example of a business that is now beginning to benefit from machine learning.