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Neobank Dave Attributes Best-Ever Credit Performance to AI-Driven Underwriting Engine

Dave, digital banking

Neobank Dave said it improved its credit performance over the past year with the use of artificial intelligence (AI).

Between the first quarter of 2023 and the first quarter of 2024, Dave reduced its 28-day delinquency rate from 2.60% to 1.83%, the company said in a presentation released Tuesday (May 7) in conjunction with its quarterly earnings call.

The latest figure was the lowest in Dave’s history, according to the presentation.

During the same period, the firm grew its originations 32%, the presentation said.

The presentation noted that originations also increased during the first quarter by 2%, despite the seasonal headwinds from tax refunds.

Dave attributed the improvements in both credit performance and originations to its AI-driven underwriting engine, CashAI.

“We believe CashAI’s time-tested and data-rich ability to underwrite effectively through multiple economic cycles creates a powerful moat that continues to distinguish Dave from new and existing competitors,” Dave CEO Jason Wilk said Tuesday during the company’s quarterly earnings call.

CashAI uses bank account transaction data to assess risk, enabling Dave to detect changes in income, spending, savings and employment — and to do so in near real-time, according to the presentation.

This differentiates Dave’s underwriting from that of others, such as FICO-based credit decisions that “rely on heavily-lagged bureau data which was often artificially inflated by fiscal stimulus impacts from 2020-2021,” the presentation said.

“With CashAI, we’ve demonstrated our ability to consistently grow origination volume while improving loss rates, further validating our ability to continue to scale, while creating more opportunities for member value and improved monetization moving forward,” Wilk said during the call.

Wilk also highlighted during the call another deployment of AI by Dave: the company’s generative AI assistant called DaveGPT.

DaveGPT, which was launched in January, answers customer inquiries, sets up direct deposits, advances account management and solves customer issues without human assistance, the company said in a January press release.

“DaveGPT has helped us reduce member success-related costs while increasing member satisfaction and supporting member retention, which is a win-win for our members and for our cost structure,” Wilk said during the Tuesday earnings call. “In the first quarter of 2024, we extended our live chat hours of operation based on the strong resolution rates we have been achieving with DaveGPT.”