AI could cut banking industry's cost base by 20% - McKinsey's

Artificial Intelligence is poised to radically change how lenders operate, potentially slashing their costs by up to 20%. For retailers and service providers, this is a significant trend to watch. Currently, most banks and lenders are only using AI for small productivity gains, like drafting emails or summarizing meetings. However, McKinsey predicts a shift toward deep operational changes. This includes automating credit underwriting and customer service workflows. What does this mean for your business? As lenders lower their overhead through AI, their profit margins increase. In a competitive market, this cost savings often trickles down to the merchant. You may see lenders offering more aggressive buy rates or lower merchant discount rates (MDR) to win your volume. Additionally, AI-driven underwriting means faster approvals for your customers. Instead of waiting minutes for a manual review, AI can process complex applications in seconds, reducing friction at your point of sale. The downside is that lenders are still in the early stages. The transition to fully AI-driven operations is slow, meaning these cost savings might not hit your bottom line immediately. Keep an eye on your financing partners' tech roadmaps. The lenders who successfully integrate AI will likely be the ones who can offer you the best terms and the smoothest customer experience in the coming years.

Source: Finextra — Lending

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