Why A.I. Can Repair the Large Gaps that Consumer Finance, Real Estate, and Credit Bureaus Have Left Exposed Due to COVID-19
As we are fresh into what we hope to be a much brighter 2021 with the U.S. President Joe Biden and Vice-President Kamala Harris, the U.S. is hungry for the utensils to help clear the messy plate that both COVID-19 and the Trump Administration left behind to clean up, particularly for the technology and finance sectors.
For tech enthusiasts, the decision by the Consumer Technology Association (CTA), for the first time, to convert the 2020 Consumer Electronics Show (CES) to an all-digital event, was not an easy one, right? With hundreds of thousands of entrepreneurs and tech geeks flying into Las Vegas each year to see the latest innovations that hope to better scale the education, security, medical/health, and other tech-related industries, this was definitely a gut punch for everyone.
So, my question to you, reader, is should entrepreneurs alike be exploring their hunger for “new, advanced technology”—or, conversely, should we look to the existing tech on the market to help identify, analyze, and execute solutions to fill the gaps left by COVID-19 this past year?
One month into 2021, the world is still working to combat COVID-19, while looking for solutions to repair the many, many industries shut down and/or significantly impaired by the global pandemic. What is the common element amongst all these industries that always has room for improvement? The realm of data and the science behind it (just ask Facebook).
So, what should we be looking at this year in terms of filling in those gaps? Differentiating the “cool factor” from “actual utility” is imperative. Will it add value to everyday life? If not, it is what some refer to as a “Pet Rock” product classification. Look to the vision and the passion behind the company. Are they backed well enough to withstand the pains of growth? Are they looking to turn the company quickly, or are they looking at their solution within the view of the long game?
#1 - Data Science is Still Sexy AF
Harvard University has labeled “data science” as the sexiest job profession of the 21st century. But what about “data” is in any way “sexy?” It’s numbers, codes, and quite frankly, an enormous migraine waiting to happen.
Data scientists are individuals who should be able to leverage existing data sources and create new ones as needed in order to extract meaningful information and actionable insights. This is traditionally accomplished through business domain expertise, effective communication and results in interpretation, utilization of any and all relevant statistical techniques, programming languages, software packages, and libraries, and last but not least, data infrastructure.
With Pfizer and Moderna’s vaccines just now entering into the public market for distribution, we are still faced with a global pandemic that for some reason, seems to still be uncontained. For many businesses across the world, Fortune500 or not, the numbers and data are f***** up, right?
So, why do we see companies like Tesla, Facebook, and Google looking to push new products into the stream of commerce, when these companies have the resources necessary and available to help us all get our numbers back in check. This is why data science-as-a-service or DSaaS should be the main focus for 2021—for every industry.
Competition is great, but right now, nobody is competing against one another. We are all on the same side, fighting against an “act of God,” if that’s even the right turn of phrase. If you (virtually) attended this year’s CES 2020, there’s no question as to the awkwardness the conference brought, not just for attendees, but for exhibitors and keynote speakers. Many technologies went unseen and were, of course, lost in translation. It is for this reason, DSaaS needs to be a subject of conversation, for all companies.
I recall at CES 2018, speaking with TeamViewer CEO, Oliver Steil, about its then-recently launched augmented reality (AR) product, Pilot. We learned that Pilot was designed to help businesses utilize AR to improve customer service, by bringing remote support into the real world, where customers could use their smartphones, point it at any particular piece of equipment, and receive adequate support from a second-level expert in a call center.
When I volunteered myself for the demonstration, I was blown away. Think about it, how many times were you sitting at home or in the office, yelling at your ISP (AT&T, Verizon, Google, etc.) about why the router wasn’t doing what it should be, even though your “cables were properly plugged in?” Absolutely genius.
Ultimately, this opens the doors to my next proposal.
#2 - We Need to Apply DSaaS to Consumer Banking
Right before CES 2020 kicked off, I spoke with Think360.ai, a rapidly growing full-stack data science company, which believes (and just hear me out on this) that migrating traditional banking services to the cloud, could actually be the answer to the industry’s biggest problem—the need for small to midsize institutions to compete in the “new normal” against challenger banks.
The company’s years of experience assist hundreds of thousands of companies immersed across the Banking, Financial, Retail, Oil & Gas, and Pharmaceutical sectors, by injecting DSaaS into their fundamental infrastructures.
You’re probably wondering what “challenger banks” are, and that’s a great question, now more than ever. You see these banks every day, but they aren’t on your street corner as you’re driving from home to work; they’re on your tv screen, your phone, Facebook, Twitter, and Instagram. These “challenger banks” as they are commonly referred to, such as “Chime”, are simply startup digital banks that are considered to be “challengers” because they compete against incumbent banks.
Challenger banks, often confused with “neo-banks,” don’t have physical branches and are growing in popularity by acquiring millions of banking customers, now more than ever thanks to the ongoing COVID-19 pandemic.
What US tech companies should be focused on this year, especially with a new White House Administration in office, are things that urgently need attention like conquering COVID, climate change, disease, poverty, mental health, and inequality across the globe—all of which can be altered with low-tech and high-tech DSaaS, according to Michael Amend, VP - Americas at Think360.ai.
“Right now, banking solutions need to create a better quality of life for all levels of society, not just the wealthy,” he told me. “If every company, whether tech-related or not, tried to be a better global citizen this year, we would come out of 2021 in much better shape. We all have that responsibility now, to better humankind in some form or another.”
Amend, who has over 35+ years of experience in the tech sector, still gets caught up in the “Pet Rock” or “cool factor” of new tech. “I must admit to wanting one of those on-demand, counter-top ice-cream makers! There are some solutions that are cool but bring no real value. Ice cream always brings value!”
And to Amend’s point, our software is hungry to act. The company’s Global CEO, Amit Das, referenced a popular aphorism that originated in Silicon Valley:
“Software eats the world. There is a continuing version of that...A.I. eats Software.”
But what does this mean in layman’s terms?
Going back to Das’ adage, somewhere between those two statements, “there is a recognition that software and A.I. are not fringe activities,” Das added.
“They are key pillars of the modern world and economy, and to that end, tech companies in 2021 have this unenviable task of keeping that foundation strong, and be the primary load-bearing pillar which drives trust, support, and growth.”
Whether we are revisiting COVID-19 as an illness, or the economic and social impacts it has created, or hell, the political environment that the 2020 U.S. Presidential Election created for the world, the workforce has changed. We saw individuals putting themselves at great risk by being on the frontlines, or adjusting their archaic corporate infrastructures to account for today’s new reality: remote work.
Over the course of this year, tech companies need to focus on driving trust, which, according to Das, requires establishing transparent practices and better handling of data; all of which will require the creation of secure infrastructures and putting the customer first when it comes to business design.
#3 - Can A.I. Help Real Estate and Mortgage Forbearance?
If you haven't seen The Patriot Act with Hasan Minhaj on Netflix, after this article, go and binge-watch it. Regardless of where you fall on the political spectrum, the dude has some legitimate arguments, specifically in the episode, "What Happens When You Can't Pay Rent."
In the episode, Minhaj discusses how millions of Americans have struggled to pay rent, facing a mass eviction crisis because of the COVID-19 pandemic. This episode is everything. Why he isn't part of Biden's cabinet, I couldn't tell you. But hands down, probably one of his best episodes of the series.
It’s important to keep in mind that we need to solve for uncertainty. Most closed-loop systems fail when designed for a finite set of scenarios. As Minhaj very early on pointed out, to which Das agrees, COVID-19 has exposed many loopholes and gaps, across industries. "Tech companies need to shoulder the responsibility of defining frameworks that can absorb uncertainty, regardless of the industry," Das explained.
For those many industries that left an immediate glut of unemployed workers, without any new jobs on the horizon, paying mortgages became an immediate concern. “The ability to claim hardship due to COVID-19, and get up to a year forbearance was problematic,” Das explained. “They did not have to pay their mortgage during forbearance, able to collect unemployment with the hope of putting some food on the table, while still being able to pay the electric bill. For millions, however, it is still rough, even one-month into 2021.”
But let’s be clear on one thing. We were still “lucky” that Fannie Mae and Freddie Mac remained in conservatorship before and during the COVID-19 crisis. Certainly, this pandemic was a wake-up call for whether we should even have a plan to privatize them.
Two weeks ago, President Joe Biden unveiled his $1.9 trillion stimulus, as the American Rescue Plan, including a call for extending the national moratorium on evictions and foreclosures until September 30, while also setting aside funds to provide legal assistance to households facing foreclosure or eviction.
As President Biden continues to advocate for those affected by the pandemic, there are still many people who need to get refinanced. “They cannot afford to pay a whole year’s worth of mortgage payments, which is a listed option. Nor can they afford to catch up in 6-12 months,” Das emphasized.
And don’t even get me started on credit scores and these all-mighty bureaus. What happened to consumer credit scores during the pandemic? Did the forbearance hurt their scores? It wasn’t supposed to, but putting off these payments did have an effect. And a bad one. These credit bureaus see the total owed on an account going up, with interest accruing. They know why, and lenders admit that it does hurt your score.
But what are they doing about it? I still get those annoying automated calls from creditors asking for money...who still report to the bureaus, which in turn still think it’s okay to adjust credit scores based on a global pandemic.
Das presented another valid concern:
“What about [a consumer’s] need to utilize some of those credit cards acquired with their good scores before the pandemic affected them? By using those cards to help fill the gaps and making ends meet, many saw their good scores that were above 700 drops down to 600 or lower. This was only due to a higher percentage of credit utilization. They never missed a payment and never went OVER their credit limits, but they got nailed by the bureaus!”
Enter artificial intelligence.
With consumers curious about how to refinance with credit scores lower than ever, A.I. looks to be the next runner-up.
“Do the banks want to foreclose and own millions of homes?” Das asked me. “This would put them in a precarious position they are not prepared to meet. The lending institutions still have bad dreams about 2008, and so do consumers. This is just another major catastrophic event waiting to happen.”
A.I. can help the banks make those decisions without putting themselves into jeopardy. “I think the right algorithms and the right amount of history can help drive the banks to make better-informed decisions that provide financial benefit in the long run without penalizing homeowners adversely affected by COVID.”
Think360.ai holds itself out to wanting to empower banks to make more decisions based on solid criteria from unique data they can now mine from new and varied sources, which will help institutions come up with what Das describes as a “hybrid, modifiable, and personalized method of determining their own credit scores” by utilizing A.I. to help predict the propensity, ability, and the probability of each homeowner to pay back their mortgage.
“It’s even better if it’s done through a federally backed program to insure these new refinance solutions.”
Remove Credit Card Penalties During the Pandemic
The new Biden-Harris Administration can assist by providing new federally backed refinance capabilities by banks that take this new criterion into consideration. “Take away the penalties for higher credit card rates accumulated during the survival of the COVID timeline,” Das says, adding that “they need to support a new and creative evaluation of any costs and risks assumed by the banks and those who ultimately hold the mortgages. The [Administration] needs to consider all avenues and AI will provide the vision for creating new opportunities to make humane decisions.”
In my discussion with the company, they proposed two possible (and realistic) solutions to addressing forbearance and credit scoring.
First, personalized solutions for a customer within the broader governing frameworks of risk management, statutory compliance, and business priorities. This, according to Amend and Das, can be achieved through defining multiple pathways that are implemented in a front-end friendly way.
“Think of it as a Briggs-Myers questionnaire that personalizes the repayment plan and approach for each customer by bringing in all the data that the institution already has, with the new data that can be collected now as part of a personal discussion exercise.”
Second, creating lower-cost, highly efficient, and informed human touchpoints. Not by outsourcing, but by over-optimizing using AI.
“This is where Kwik Banking comes into play, with its AI and video-driven capabilities that allow banks to completely manage a distributed customer and relationship manager footprint in a secure and personalized manner…,” continued Das.
“Our solution brings alternate data and machine learning together for lending institutions that are looking to get instant data – instant insights – instant decisions, from alternative sources of data. We create unique NLP and deep learning-driven algorithms based upon criteria defined and designed in conjunction with the banking risk teams and the Federal guidelines. We can use structured and unstructured data to help lenders make the best decisions for everyone involved.
We have upended the traditional risk scoring mindsets by building models and frameworks that incorporate some really edgy insights into traditional underwriting, and we truly believe that when it comes to customer behavior - everything is connected.”
By incorporating consumer banking with smart A.I. solutions, like KWIK Banking, we don’t have to be worried when a local branch “closes'' or “shuts down,” whatever the reason. When I moved out of Ohio back in April and was ready to make my first lease payment on a condo in Saint Petersburg, Florida, my local Chase branches were closed and I couldn’t speak to anyone about a large cash withdrawal. Consequently, I had to travel all over hell and ended up going to a third-party bank ATM to handle it. Case and point.
For the banks, it does provide the ability to expand without the investment of brick and mortar into new regions. Instead of building 20-30 branch locations, they might build 2 or 3, mitigating risk. The rest of the expansion will be in the form of advertising and utilizing the formulas copied by the “Challenger Banks.”
This brings us full-circle on why Harvard’s assessment of data science being the industry’s sexiest profession for the year makes it essential for cost-effective, scalable, and business responsive designs to take place across cloud and on-premise infrastructures.
In other words, welcome to DSaaS. We're in for an exciting ride.