AI in Receivables Finance – Hopes and Fears

Author: Luiza Buserska, Corporate Communications Executive at CODIX

Financial institutions are looking for ways to improve efficiency, reduce costs and increase productivity, especially in volatile times. All attention and optimism are now focused on the remarkable advancements in artificial intelligence (AI). AI is being used more and more every day and apparently, it emerges as a transformative force in the factoring and receivables finance sector. However, it is crucial to question whether we should view it as a miraculous panacea for everything.

Opinions and attitudes about it vary widely, from expectations that AI will revolutionize the entire economy and our way of life, to that it threatens the very survival of humanity. Whether humans and organizations will be able to take control and channel the process to their advantage remains to be seen. While it is hard to predict the future, it is worth examining some pros and cons when it comes to incorporating AI in the industry.

AI-powered solutions promise to offer innovative approaches to address financing challenges, streamline processes, and enhance decision-making. By leveraging AI algorithms and advanced analytics, financial institutions hope to be able to assess creditworthiness, automate credit approvals, and expedite the financing process. This would ensure that businesses could access the funds they need efficiently, saving time and avoiding the cumbersome traditional credit approval procedures. By harnessing the power of AI to analyze vast amounts of data, monitor market trends, and identify potential risks, financial institutions could make informed decisions that benefit both borrowers and lenders.

As these products continue to evolve, the integration with traditional Factoring and Receivables Finance solutions is likely to increase. And yet, uncertainties remain regarding the speed and extent of this transformation. What happens when algorithms go wrong and how secure the platforms are? Corporates considering engagement with AI-powered platforms should pay attention to the data treatment practices of their chosen technology provider.

In the meantime, as regulatory mechanisms for this technology are sought, companies and individual users who decide to keep up with the times should keep in mind that, like anything, AI has its advantages and disadvantages.

It should not be forgotten that the information provided by AI is unverified and taken from various sources on the Internet, incl. social media, many of which are unreliable. Among other problems is the danger of leaking information and sensitive data. Chatbots, such as Bard and ChatGPT, are human-sounding programs that use so-called generative artificial intelligence to have conversations with users and respond to queries. Human reviewers can read the chats, and in addition, such an AI can reproduce the data it has learned during training, creating a risk of information leakage.

Such technology can produce e-mails, documents, photos and even software, promising to significantly speed up the execution of tasks. But the communication may include misinformation, sensitive data, or even copyrighted text.

AI technologies are constantly changing and improving, which presents a challenge for companies. For example, a machine learning model can solve extremely complex problems, but humans could have challenges understanding how the model reaches conclusions or makes predictions and what data it uses, then it lacks transparency and the processes cannot be controlled.

This is why a growing number of organizations around the world are already creating rules for dealing with AI chatbots, warning their staff to be careful when using publicly available chat programs and not to share internal company information.

Some companies have even developed software to address such concerns, offering the businesses the ability to prevent their data from being swallowed up in public AI models, as well as to restrict and flag the distribution of some data outside.

At this stage, in addition to the absence of regulations to impose any order, these technologies have their limitations. And while AI will continue to evolve, users need to be cautious when working with it.

Ultimately, although the path may be uncertain, receivables finance industry must remain vigilant, adaptive and proactive. And while the development of AI holds promise for transforming the receivables finance sector, the most successful strategy seems to be finding the balance between the industry's ability to remain open and adaptable to change while ensuring the protection and security of its clients. This is why embracing the right business strategy which will provide the so needed flexibility can be critical to overcoming the challenges ahead and charting the path to economic recovery and growth. Whether artificial intelligence will make our lives easier and provide added value or rather create problems is yet to be seen.

This article was published by BCR Publishing, the leading provider of news, market intelligence and training for the global Receivables Finance industry: TRF News – July 2023.
The article was featured also on FCI’s website.