By Gabriele Sabato, Co-founder and CEO, Wiserfunding.
Gabriele, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
I have spent almost 20 years in risk management working for several banks and consultant companies in different countries around the world. My focus has always been on how to automate credit decision processes using risk scoring technology and setting the most appropriate risk appetite. During my Ph.D, I had the opportunity to work under the supervision of Prof. Ed Altman who is one of the pioneers of credit scoring. Two years ago, thanks to the advent of the new AI technologies, we decided to set up Wiserfunding to help small and medium sized enterprises (SMEs) accessing finance more easily. Through our online platform, we allow businesses looking to obtain finance or lenders and insurers looking to assess the risk of business applicants to get more accurate data in order to make better decisions quicker than ever before.
At the Technology & Innovation Risk Summit, you are taking part in a panel discussion to discuss ‘Assessing the use of artificial intelligence across the industry to enhance banking practices and efficiency’. What do you think will be the key talking points amongst panelists and why?
I think that established and challenger banks are facing one of the biggest changes in their history. The financial landscape has changed dramatically as a result of the 2008 financial crisis: the new alternative lenders and fintech companies are gaining market share at a fast pace; profitability margins of financial institutions have been decreasing for long time; and speed to offer is becoming increasingly important in defining the customer experience. Artificial intelligence and outsourcing of non-core functions are, in my opinion, the most important solutions to address this change. I am sure that the audience will want to understand from us how we can help them in this journey to implement them successfully.
How do you think financial institutions can use AI to personalize the service offered to customers?
Artificial intelligence helps to automate processes, make them more objective and improve the customer experience. For example, using our SME Z-Score, financial institutions can assess potential or existing clients in real time and set different levels of due diligence or pricing based on their risk profile. Using our objective and independent tools would allow financial institutions to focus more on the product they offer and tailor that offer to each specific customer.
What impact do you think has AI and machine learning on risk management?
Several new fintech firms like us have started to challenge the traditional risk management approaches and the established Credit Reference Agencies (CRAs) and Rating Agencies (RAs). Thanks to AI, our clients can connect to our platform and receive a risk assessment in real time. We have reduced the human intervention in assessing the risk profile of companies and increased the efficiency of the process without affecting the quality of the risk assessment.
How do you see financial technology evolving over the next 6-12 months?
A lot of new data is becoming available thanks to the Commercial Credit Data Sharing (CCDS) and the revised Payment Service Directive (PSD 2). Both will help reducing the information asymmetry that still affects SME lending. However, the value of this information will need to be assessed carefully.
Investors are becoming increasingly focused on risk management, as we are in the longest benign cycle in history and the markets are starting to get nervous. Risk technologies will need to become even more connected and capable to provide a credible risk assessment processing a large amount of unstructured information.