AI Recreates The Concept Of Creditworthiness In LATAM

It’s been a while since cash was king here in the U.S., but in other parts of the world, such as South America, paper money has managed to retain its grip, albeit slightly diminished as a result of the pandemic’s many lifestyle changes that exposed cash transactions as cumbersome and risky.

It’s a reality that Brighterion’s Sudhir Jha told PYMNTS has resulted in a pan-regional progression that is moving more Latin American consumers into digital payment solutions, even though credit penetrations remain low.

“There’s not a lot of historical data about consumers who are new to digital ecosystem — that’s why there is a desire to go directly to an AI-based solution in many cases, because you want a solution that works today, but also scales really well and attracts more and more customers to your system,” Jha explained.

That growing regional need for artificial intelligence (AI)-based solutions is what motivated Brazilian insurer Porto Seguro to team with Brighterion. Announced recently, the engagement leveraged Porto Seguro’s analytical expertise in combination with Brighterion’s AI technology to build high-performance models custom-created to identify risks better.

Making The Most Of The Models

Good AI systems lock out the fraudsters, Jha noted, but they also have to generate fewer false positives to be really useful. Merchants need to stop fraudsters, but they also must make sales to stay in business. A fraud system that is sending away too many valid attempts can be just as damaging, if not more so, to a merchant’s bottom line than a system that is too lax.

And fraud isn’t the only threat that AI, when properly calibrated, can spot before it arrives. Pinpointing potential defaults and intervening with the consumer before trouble arises can also be critical in protecting a firm’s revenue stream, Jha said. For example, Brighterion was able to spot almost 50 percent of potential defaults a full 70 days in advance during the pilot phase for Porto Seguro. That creates an opportunity for firms to intervene with their clients in various ways before that default actually comes to pass. That might mean using a new payment structure or limiting access to new funds.

But perhaps just as importantly, the system spots all the clients who aren’t at risk of default and present a prime opportunity for expanding services.

“Credit risk in general can be leveraged as data, for both positively and negatively impacting the customer,” Jha said. “One of the things that really pleases us about the Porto (Seguro) engagement is that they are focused primarily on those positive impacts. Accounts that are not likely to default are much bigger in volume, and with that data, firms can work toward providing more credit, more flexible terms and more offerings in general to those customers who are not a risk in their portfolio.”

Because the real under-the-hood power of using AI is firms’ ability to interact with their data and use it to build solutions tailored to the needs of specific clients. At the end of the day, Jha noted, AI puts the optimal set of options in front of the consumer in a manner they can understand and lets them make the choices that are best and most relevant for them.