Credit unions have an AI risk gap: American Banker research

Financial institutions are split on how they view the dangers of Artificial Intelligence. New research shows a significant 'risk gap' between banks and credit unions. Banks are much more likely to label AI model performance as a 'high risk' compared to their credit union counterparts. This discrepancy matters for retailers because these institutions provide the backbone for many consumer lending and credit card programs. For business owners, this highlights a potential shift in how credit is approved. If banks are more cautious, they may tighten AI-driven underwriting or require more human oversight. This could lead to slower approval times or more conservative lending criteria. Credit unions seem more optimistic about the technology, which might make them more aggressive in adopting AI to speed up loan decisions. However, the lack of perceived risk could lead to regulatory scrutiny later on. As a merchant, your financing partners are increasingly using these algorithms to decide who gets a loan at your checkout. Understanding that your lenders might be underestimating or overestimating the risks of these tools is crucial. You should ask your lending partners about their AI risk management strategies. Ensure their tools are stable so your customers don't face sudden declines if a model fails or a regulator steps in.

Source: American Banker — Top News

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