Research demonstrates that AI-powered underwriting increases small business loan approvals among protected classes by more than 100%
Uplinq Financial Technologies, the first global credit decisioning support platform for small business lenders, today announced the publication of “ Fair and Accessible Credit for Small Businesses: A Guidebook for Financial Institutions,” a white paper that blueprints how banks and credit unions can leverage AI technology and alternative data to expand lending opportunities for small businesses.
The white paper, commissioned by Uplinq, was developed by Cornerstone Advisors, a leading management and technology consultancy for banks, credit unions and fintechs. It draws on expert insights from senior executives at Visa, the SME Finance Forum (part of The World Bank group), EY, Scotiabank and more to pinpoint the key barriers preventing small business owners, particularly in underserved communities, from accessing fair and affordable loans. The paper also reveals the macro and microeconomic impact of a lack of access to credit and offers practical steps to bridge this gap through technological and cultural shifts.
“Uplinq was founded to democratize access to working capital for small businesses through the use of non-traditional and alternative data sets. The findings in this paper reveal that our mission is very much needed,” said Patrick Reily, co-founder of Uplinq. “Today, by broadening the data sets and data sources we use in loan underwriting, we can empower financial institutions to extend more affordable credit to small business owners – particularly among minority and protected classes – who have been grossly underserved under traditional benchmarks. Expanding and improving small business lending not only strengthens communities and stimulates economies, but also helps financial institutions boost their bottom lines.”
Access to reasonably priced credit from trusted financial institutions is critical for economic expansion and small business formation, which directly affects wealth creation, business equity and financial inclusion – especially among underserved groups. The median net worth of Black women entrepreneurs, for example, is 10 times greater than that of those who do not own equity. However, as the paper illustrates, studies show that women and small business owners of color are often considered “higher risk” and therefore struggle to access credit from traditional lenders based on conventional underwriting criteria. This can force budding entrepreneurs to abandon their dreams or push small business owners to resort to less advantageous funding sources, such as loans at higher rates from non-bank sources.
Small businesses and financial institutions alike stand to benefit from further leveraging AI technology like machine learning to revamp their underwriting and automate decisioning in lending. As the white paper outlines, expanding the use of alternative data and adopting these technologies offers advantages like improved credit assessment and more efficient collections and loss mitigation. In fact, research shows that financial institutions deploying Uplinq-based underwriting more than doubled small business loan approvals among protected classes, from 38 to 82%.
“The path to fair and accessible small business lending is as much about transforming the culture at financial institutions as it is about overhauling technology and data,” said Ron Shevlin, head of research at Cornerstone Advisors. “Banks and credit unions must foster a culture conducive to innovation and developing sophisticated solutions to longstanding problems. Leaders at the helm of these institutions must act with conviction to educate and reskill, reinforce new practices, encourage problem-solving, and inspire creative thinking to produce tech-enabled transformation.”
In conjunction with the white paper, Uplinq and Cornerstone will hold a webinar in February to further explore how AI technology can reshape ethical access to credit for small businesses. To download the white paper and discover the roadmap to fair, accessible, and more profitable small business lending, visit uplinq.co/whitepaper/fair-and-accessible-lending.
As the first global credit & scoring assessment platform for small business lenders, Uplinq is a purpose driven company with a mission to help small business owners gain access to fair and ethical credit, while enhancing SMB lending practices for all lenders globally. Uplinq’s breakthrough technology empowers lenders to approve and manage risks on loans they would have otherwise declined based on traditional loan underwriting criteria, while incorporating environmental, market & community data to better understand the specific loan applicant. Its technology has served as a foundation for more than $1.4 Trillion in underwritten loans. Learn more about Uplinq at uplinq.co and connect with them on LinkedIn, Twitter or YouTube.
About Cornerstone Advisors
For more than 20 years, Cornerstone Advisors has delivered gritty insights, bold strategies and data-driven solutions to build smarter banks, credit unions and fintechs. From technology system selection and implementation, to contract negotiations, performance improvement programs, strategic planning, merger integration, and advisory services, Cornerstone combines its expertise with proprietary data to help financial institutions thrive in today’s challenging environment. For more information, visit www.crnrstone.com or connect with us on LinkedIn.
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