Zest AI, the leading software provider in lending and credit underwriting, has recently conducted a study at Money2020 about biases in the credit scoring system about how artificial intelligence (AI) and machine learning (ML) play a role in removing these biases.
Credit scores have gotten attention over the past few years. Critics have been denouncing its accuracy and its use of data that is reflective of historical bias.
They have also said many omit certain types of data that might include a broader swath of people, including Black and Hispanic consumers.
A notable use of AI within the financial industry is its ability to address racism in credit scoring.
In its survey, Zest AI found 70% of respondents surveyed claim that racism is built into the existing credit scoring system, and to combat that, 83% of respondents believe AI and ML is key to lead to better credit scoring.
Acting on Zest AI’s findings to improve the sector
With these findings, it is now imperative that the financial services need to do more, particularly as many within it are looking for this to change; 65% of respondents said they would willingly switch jobs to work at a company that is doing more to advance racial equity.
The survey highlighted that AI could enable this change (83% said AI/ML would lead to better credit scoring), but it also showed that there is a need for regulators in the industry to adapt to this new technology.
Among the respondents, an overwhelming amount (90%) said regulators should allow greater use of AI in the industry.
To utilise the power of AI effectively and reduce bias in credit scoring, the industry needs to be aware of the blind spots.
Although 77% of people surveyed believe the financial services industry treats customers differently based on race and gender, only 15% said their own company does, highlighting an emerging blind spot in the industry.
In the survey results, Zest AI commented: “While there still is a long road ahead to achieve racial equity in financial services and lending, the good news is that we have the tools now to enhance transparency and fairness in lending that the industry aspires to."