How New Technology Can Unlock Possibilities for Small Business Lending

Small and medium-sized business (SMB) lending has undergone a transformation in recent years, thanks in large part to advancements in technology. Innovations like artificial intelligence (AI), combined with the incorporation of alternative data, have provided new possibilities for lenders to improve the efficiency of their operations, including fraud prevention, and their ability to expand credit access to those who may be underserved by traditional methods. For more on the role of new technology in SMB lending, read the first blog in this series. 

Streamlining the Back Office

Although much of the focus in the industry is on the customer-facing side of AI, it also has the potential to streamline internal operations. Manual processes can be automated by using AI, reducing time spent on repetitive tasks and driving efficiencies across internal operations. 

Fairness and Equity in Underserved Markets

Many small businesses, especially those owned by women, minorities, or located in underserved areas, have traditionally struggled to secure financing. A crucial aspect of credit risk modeling involves ensuring fairness and equity. As a critical part of the credit ecosystem, we understand the importance of ensuring that the models are ethical and deliver the expected results by maintaining robust processes for model development.

Balancing Fraud Prevention and Customer Experience

SMB lenders can also draw upon these technological advancements when balancing fraud prevention with customer experience. This area has seen significant growth and innovation, with new business verification products and fraud detection tools hitting the market. While fraud detection is essential, adding friction to a SMB’s onboarding experience may drive small business owners to competitors. With the Behavior Analytics Market projected to top $13.4 billion by 2029 from $5.5 billion in 2024, expect lenders to increasingly turn to tactics like typing speed or application completion times to flag suspicious activities, while offering a smooth customer experience. 

The Future of AI in SMB Lending

AI will likely continue to play an essential role in streamlining operations, expanding access to credit, and improving fraud detection. However, there are still challenges to its widespread implementation, particularly with the changing regulatory landscape and the need for ongoing human oversight. As the technology continues to evolve, it will become easier for lenders to offer customized, flexible solutions to SMBs, while also ensuring they remain compliant and minimize risk.

Leveraging AI in SMB lending offers enormous potential to increase their opportunity to make smarter, fairer, and faster decisions. The future of SMB lending is digital, and the possibilities are only just beginning to unfold.

To learn more about how Equifax uses AI, visit the EFX.AI page and read about Equifax drives responsible AI innovation.

To discover how to utilize a combination of both personal and commercial credit data, check out OneScore for Commercial.