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‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

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Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#71

Post by sdoering »

IgorPartola wrote: post #62
sdoering wrote: post #15

Earlier quoted context omitted.

When dealing with stakeholders in big corporations I learned that they absolutely needed AI, machine learning and data science as capabilities in the projects that they started. Even if data was only very tangentially related to the core product/project. If so, for example one needed to datascience the shit out of project metadata to create a project efficiency self optimization loop. Or what ever crap one could come…

I am unclear as to whether what you are saying is that they need data science to justify their projects because when they say that an AI told them that they need $X extra for the project it carries more weight than when they say they did the analysis by hand or if the data science actually provided value in this case.

No. They need AI in their projects to receive management buy in (and funding) because management swallowed the hook and now wants everything AI & data driven (even if it makes no sense) to be able to brag to other managers from the competition and other industries that they now use AI and are a data driven company.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#72

Post by epolanski »

kqr wrote: post #54
epolanski wrote: post #51

Earlier quoted context omitted.

No, we have some of the highest home ownerships in the world. 1/3rd of salary is more than enough to buy you a home. That's enough to get a 200k loan for 30 years while making average salary (1700 net euros).

Aha you mean the interest cannot exceed 1/3 of salary, not the principal? That makes more sense.

I'm not sure I expressed myself correctly: whatever you make you can't have your loan payments exceed one third of your monthly salary. So if you make 2000 euros, your loans cannot exceed 666 €.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#73

Post by User23 »

jacquesm wrote: post #63
sdoering wrote: post #29

Earlier quoted context omitted.

My SO used to work in a bank in the business loan securities back office. Believe me. Lots of people and businesses apply even if they themselves see no realistic chance of receiving a loan. And in private non business customers there are even a significant amount that have less than nothing to their name, living of welfare and still don't see, why they should not receive a loan from the bank for the newest iPhone. O…

Excuse my snarkiness, but having actually worked for a bank and seeing the inside of the loan department from an IT perspective, the bulk of that translates into: banks will allow the people that are already wealthy to leverage to make them even more wealthy while working hard to keep those already down firmly in their place. Not to mention to take advantage of them by charging them exorbitant fees for the little bit…

Since you have industry experience how would you have banks rectify this perceived injustice? I can’t conceive of an underwriting process worthy of the name that isn’t going to consider those borrowers with collateral more creditworthy than those without.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#74

Post by citizenpaul »

If you spend 5 minutes in a bank this is not surprising. Probably 99.99999% of most banking loan staff have zero input on if a loan is accepted or not. They just follow the rules set from on high and tell you yes or no to your face instead of a computer. Their job is really just to calm you down when you get rejected or tell you what you have to do to get accepted from their secret rules.

I even worked on a loan program years back to centralize a bunch of acquired banks. They literally told their staff not to tell customers there was nothing they could do and a set of rules in the computer made 99% of the decision for the loans now.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#75

Post by throwthere »

I mean Zillow’s valuation platform that bought homes had great accuracy. We all know how that turned out— Zillow ended up buying a whole bunch of houses for much more than they were worth. Such as the fate of recommender systems operating an auction markets with humans who know better.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#76

Post by djbusby »

User23 wrote: post #73
jacquesm wrote: post #63

Earlier quoted context omitted.

Excuse my snarkiness, but having actually worked for a bank and seeing the inside of the loan department from an IT perspective, the bulk of that translates into: banks will allow the people that are already wealthy to leverage to make them even more wealthy while working hard to keep those already down firmly in their place. Not to mention to take advantage of them by charging them exorbitant fees for the little bit…

Since you have industry experience how would you have banks rectify this perceived injustice? I can’t conceive of an underwriting process worthy of the name that isn’t going to consider those borrowers with collateral more creditworthy than those without.

For one, overdraft fees should only be charged once per calendar month, not for every overage.

Also, the burden on the bank for an overdraft is near zero, so why is it $35 for the customer? Perhaps a fee of only $5 would be less regressive?

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#77

Post by skybrian »

djbusby wrote: post #76
User23 wrote: post #73

Earlier quoted context omitted.

Since you have industry experience how would you have banks rectify this perceived injustice? I can’t conceive of an underwriting process worthy of the name that isn’t going to consider those borrowers with collateral more creditworthy than those without.

For one, overdraft fees should only be charged once per calendar month, not for every overage. Also, the burden on the bank for an overdraft is near zero, so why is it $35 for the customer? Perhaps a fee of only $5 would be less regressive?

Yeah, that's a very high-interest loan.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#78

Post by User23 »

djbusby wrote: post #76
User23 wrote: post #73

Earlier quoted context omitted.

Since you have industry experience how would you have banks rectify this perceived injustice? I can’t conceive of an underwriting process worthy of the name that isn’t going to consider those borrowers with collateral more creditworthy than those without.

For one, overdraft fees should only be charged once per calendar month, not for every overage. Also, the burden on the bank for an overdraft is near zero, so why is it $35 for the customer? Perhaps a fee of only $5 would be less regressive?

I don’t know if it’s still the case, but it used to be at least some US banks would order pending transactions in descending order of amount to maximize overdraft fees. For example, if you had $100 in your account and had charges for $1, $1, $1, $1, and $100 then as a “courtesy”[1] the bank would clear the $100 and then charge $35 times 4 for the remaining transactions.

Anyhow that’s really awful and needs to stop, but I don’t see eliminating overdraft fees making a real dent in the advantages wealthy borrowers have.

How could underwriting be changed to identify truly creditworthy borrowers who don’t have any financial or real assets? We already know that simply lowering underwriting standards has problems.

[1] Their words, not mine.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#79

Post by AtlasBarfed »

Brian_K_White wrote: post #47
platers wrote: post #23

Earlier quoted context omitted.

Shouldn't the sentence be flipped in that case? I see no reason why expensive human is needed or wouldn't give similar answers.

I think they mean algorithmic as in, simpler and deterministic and auditable plain if/then/math algorithm, vs black box magic AI. Even if an AI can produce seemingly the same results as a human, it should be out of the question anyway to let an inscrutable black box make decisions over people's lives. Because at least with a human you (their boss, or a judge, etc) can ask them "Why did you decide that?" and they can…

I remember ten years ago at least some AI systems were done on loan approvals, and bam, and out came the same structural racism in financing and loans.

If the number of variables is low, then the extant bias may be cooked into the inputs and the AI result is then inevitable. For example, income will be suppressed all other variables being the same, that's an immediate loss in approval chances.

If crime maps and the like go into some risk profile on the safety of the property, well guess what, that'll be effectively racist and/or lower loan preapproval.

It doesn't have to just be that the race checkmark/dropdown becomes an input.

But you're right, the AI is a black box. Rules engines or other calculations at least can be back-traced, and maybe counter-weighted.

A great deal of structural and persistent racism comes down to housing: where you live. It doesn't take a die-hard Zillow user to know that where you live will signal things to the loan application algorithms, regardless of "race blind" applications if that is even a thing.

Thus, higher loan rate, lower maximum value, less access to various stratifications of neighborhood "eliteness". And the transaction rate/speed on housing is really low (annoyance to move, realtor fees, closing costs, PITA to shop for new/sell your old), so policy to address the bias would take a longer amount of time to actually show up in the stats than its political survival time (because so many well monied interests will lobby for its removal).

And thus, the more things change, the more it just stays the same.

Re: ‘Simple’ AI can anticipate bank managers’ loan decisions to over 95% accuracy

#80

Post by Gollapalli »

sdoering wrote: post #15
hooande wrote: post #4

This isn't surprising. Most 'AI' comes down to correlating a small number of variables (one or two) with a prediction target. The real benefit of any form of machine learning is detecting functional relationships between variables (ie, "when this AND NOT that OR this"). It's just that these relationships don't provide a real benefit in 99/100 real world use cases. In the case of a loan, if the credit score is high th…

When dealing with stakeholders in big corporations I learned that they absolutely needed AI, machine learning and data science as capabilities in the projects that they started. Even if data was only very tangentially related to the core product/project. If so, for example one needed to datascience the shit out of project metadata to create a project efficiency self optimization loop. Or what ever crap one could come…

Are we headed for another AI winter? Because this sounds like a recipe for another AI winter.
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