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AI loan screening for Japan regional banks to take only seconds

Hitachi and SBI affiliate to set up joint venture

The AI-based loan screening is expected to broaden from mortgage applications to other types of loans.

TOKYO -- Japanese internet bank SBI Sumishin Net Bank will work with Hitachi to offer an instant loan-screening service powered by artificial intelligence to regional banks, a sector facing intensifying competition amid the country's shrinking population.

The AI will take only seconds to compute risks and express them as a value between zero and 100%, using such data as annual income, occupation, family composition and credit history. Bank staffers conventionally place applicants into several different risk levels based on credit history, a process that takes days.

This will mark the first use of AI in Japan for loan approval. Such lenders as Sony Bank and MUFG Bank have already employed it for preliminary screening.

A joint venture will be set up around April to launch the service in October. It will be majority-owned by SBI Sumishin Net Bank -- a 50-50 joint venture of SBI Holdings and Sumitomo Mitsui Trust Bank.

The plan is to start out with mortgages, aiming to serve tens of the nation's 100 or so regional banks within two to three years. The partners intend to broaden to such other areas as card loans and lending to small and midsize businesses.

The AI will pool data from different regional banks for increased accuracy. It will update information provided by the banks every six months to a year for reassessment.

For loans with fewer defaults, like mortgages, limited volumes of data have made it difficult for AI to compute risks accurately. SBI Sumishin Net Bank and Hitachi have run trials since 2017 and overcame this challenge by enlarging the sample size.

SBI Sumishin Net Bank sees the more precise AI-powered assessment enabling regional banks to capture loan demand from applicants who would have otherwise been turned down. Lenders could also offer new features, such as better rates for qualifying borrowers.

Mortgage applicants continue to decrease as the population shrinks, creating a harsher competitive climate for regional banks. The new service aims to help them boost efficiency and may later be offered overseas and to larger Japanese lenders as well.

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