How is AI reshaping lending software?
- Abhijit Shankaran
- 4 days ago
- 5 min read
In the lending industry, the playing field among NBFCs, Small Finance Banks (SFBs), and traditional banks is more balanced than before, with all having equal access to growth opportunities via Artificial Intelligence (AI) driven lending solutions.
Traditional banks have dominated the lending industry owing to their infrastructure, customer bases, and financial capital. However, AI has levelled the playing field, enabling NBFCs and SFBs to compete equally.
Key Takeaways
AI is levelling lending for banks, NBFCs, and SFBs
AI-Led lending software
Dependence on software to lead decision-making
Focuses on speed and cost reduction
AI-Driven lending software
Human-led with AI support
Emphasises customer experience and compliance
AI enhances customer service automation, risk assessment, fraud detection, and personalised financial products. By integrating AI into loan origination and management software, banks and NBFCs can quickly gain insights into lending operations and business success.
With lending software providers offering similar AI-driven capabilities, levelling the field for financial institutions, the key question is: Should the future of lending software be AI-driven or AI-led?
AI-Led versus AI-Driven lending software: What's the difference?
AI-led means technology dictates processes with predefined and learning algorithms replacing manual tasks and decisions to amplify efficiency, speed and productivity. It represents a more transformative approach, where artificial intelligence serves not merely as a tool but as a core element of the business strategy.
Purpose: To be AI-led with little to no human authority
Examples:
Predictive Portfolio optimisation to minimise defaults:
Using predictive analytics to identify high-risk borrowers basis repayment behaviour, allowing lenders to adjust portfolios and mitigate potential losses.
Dynamic Pricing models for real-time risk assessment:
Lenders can offer personalised interest rates & terms based on market conditions and the risk profile of borrowers to enhance competitiveness.
Aspect | AI-Led Lending Software | AI-Driven Lending Software |
Scope | Technology dictates decision-making, replacing manual tasks and decisions. | AI acts as an enabler; it supports human judgment and strategy. |
Approach | Transformative – AI becomes the core of business strategy. | Strategic mindset – AI complements human-led decision-making. |
Purpose | Reduce overheads and costs. | Enhance efficiency while keeping human oversight. |
Focus | Speed, productivity, and automation at scale. | Customer experience, compliance, and adaptability. |
Risk | Over-reliance on algorithms; reduced human oversight. | Balanced use of AI and human judgment; better trust and transparency. |
Examples | - Predictive portfolio optimisation to minimise defaults. - Dynamic pricing models for real-time risk assessment. | - Automated underwriting & instant KYC verification. - Workflow automation for faster loan approvals. |
AI-driven is a strategic mindset, where AI is viewed as an enabler for decision making as opposed to being at the core of business strategy, processes and the workforce. AI automates operations, guides personnel and enhances human judgement.
Purpose: To be human-led with AI support
Examples:
Automated Underwriting and instant KYC verification:
Analyses credit histories, income documents, and identity proofs, cutting down approval times from days to mere minutes. This reduces manual errors and ensures adherence to regulatory standards.
Workflow automation for faster loan approvals:
Every stage of the loan lifecycle, from application to disbursement and repayment, is made seamless, eliminating redundant tasks, enabling real-time status updates, improved operational efficiency and finally customer satisfaction.
Loan Origination System (LOS) for Banks and NBFCs Loan Management System (LMS) for Banks and NBFCs 7 KPIs to Measure the Success of Lending Technology
AI-driven processes prioritise the borrower and carry forward their enhancement towards customer experience as follows:-
Personalised lending experiences: Loan products offered specifically to segments and micro-segments based on CIBIL score, repayment insights, among others
Risk Management: Anticipating market shifts and borrower trends
Innovation Business Models: Embedding finance into ecosystems and creating new revenue streams
The Future of Lending Software: Loan origination to management
For financial institutions, the future lies in being AI-driven rather than AI-led. While this takes shape differently across organisations, to be AI-driven means that one doesn't outsource thinking and reasoning to AI. AI as a strategic enabler empowers organisations to:
Build trust with customers through transparency and personalised engagement
Stay updated and innovate faster than competitors
Adapt to regulatory changes and remain compliant
AI-led lending software strategies offer speed and cost efficiency, but they can lead to excessive dependence on algorithms and diminished human oversight. Human thought is outsourced to AI, taking away creativity, originality and insight.
Conversely, AI-driven approaches achieve an optimal balance by utilising AI for automation and insights while factoring human judgment as central. This propels customer-centricity, compliance, and adaptability, positioning AI-driven methods as the sustainable option for the future of lending.
At SimSol Technologies, we believe in technology as an enabler. Our AI-driven lending software solutions empower banks and NBFCs, as well as financial institutions, with insights into their operations and business. We help lenders deliver faster approvals, personalised loan experiences, and robust risk management. With compliance-ready workflows and analytics, we ensure your lending business stays agile and future-ready.
Explore Scolend for lending & co-lending
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LOS + LMS + Co-lending suite Choose all, bundle or use as individual solutions
FAQ (Frequently Asked Questions)
What is lending software?
Lending software is a digital platform that automates and manages the entire loan lifecycle—from loan application and underwriting to disbursement and repayment. It helps Banks, NBFCs, Small Finance Banks (SFBs) and other lenders streamline operations, reduce manual errors, ensure compliance, and improve customer experience.
What is the difference between AI-driven versus AI-led lending software?
AI-Led: Technology dictates processes. Predefined and learning algorithms replace manual tasks and decisions, making AI the core of business strategy. The focus is on speed and cost reduction.
AI-Driven: AI acts as an enabler, supporting human judgment and strategy. It automates workflows and enhances decision-making without replacing human oversight. The focus is on customer experience and compliance.
How has AI levelled the field for Banks, NBFCs, and SFBs?
AI has democratized access to advanced tools like predictive analytics, automated underwriting, and fraud detection. This enables smaller players like NBFCs and SFBs to compete with traditional banks by improving efficiency, reducing risk, and offering personalized lending experiences.
What are some examples of AI-driven systems?
Automated Underwriting & Instant KYC: Cuts approval times from days to minutes while ensuring compliance.
Workflow Automation: Streamlines loan processing from application to repayment, improving operational efficiency and customer satisfaction.
What are some examples of AI-led systems?
Predictive Portfolio Optimisation: Uses analytics to identify high-risk borrowers and minimise defaults. Dynamic Pricing Models: Offers personalised interest rates and terms based on real-time risk assessment and market conditions.
What is Scolend?
Scolend is a comprehensive and integrated solution for both Lending and co-lending. It is an integrated LOS, LMS and Co-lending solution. Choose all 3, individually or bundle in 2.
Loan Origination Software (LOS)
Loan Management Software (LMS)
Co-lending (CLM-1 Ready)
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