August 17, 2018 – MUFG Bank Ltd. is set to begin extending loans to micro enterprises and small- and medium-sized businesses based on artificial intelligence (AI) as early as the spring of 2019 — a move it hopes will make the loan process more efficient and attract new customers.
Under the system, AI will evaluate businesses’ creditworthiness based on their transaction histories to determine whether or not to extend loans to them. By completing procedures online the bank expects to be able to quickly extend loans at low cost while spurring new demand.
Corporate clients who have main accounts at the bank will be eligible to apply. Under the system, the client first visits a special website and registers their account and other information, and sets the amount they want to borrow. The AI system then analyzes, based on the client’s past transactions, their exchange of funds with partner companies as well as movements in salary payments and other information. The firm’s creditworthiness, covering such questions as whether they are engaged in solid work and whether their cash flow is stable, is then converted into a numerical figure. This will enable the bank to state whether it has accepted the client’s loan application as early as the same day.
The upper limit for the loans will be 3 million yen, with the loan period set at half a year or less. The basic interest rate will be 10 percent per annum, with that amount raised or lowered according to the risk of default.
Up until now, there were cases in which new companies, micro enterprises and small- and medium-sized businesses were unable to receive loan approvals when they urgently needed funds due to a shortage of collateral or a lack of proven business performance.
Banks, meanwhile, had to spend considerable time going through the applicant’s financial statements and checking their collateral, meaning they were not able to sufficiently respond to their funding needs. The AI system closes the gap between the two sides.
Another major banking group, Mizuho Financial Group Inc., launched AI-based loans for individual customers in September 2017.
Overseas, JPMorgan Chase & Co. has introduced AI-based loans, while China’s Alibaba Group and U.S. retail giant Amazon.com Inc. have also commercialized AI in internet-related businesses.