Underwriting in the financial sector is poised for a significant transformation by 2030, driven by advancements in artificial intelligence (AI) and automation. According to a recent report from Experian, institutions are seeking faster decision-making processes, enhanced fraud detection, and increased personalization in credit offerings. The report is based on insights from 708 senior credit and fraud risk leaders across ten countries, revealing that 83 percent of respondents anticipate real-time loan approvals and payments will become commonplace.
This shift is largely influenced by evolving consumer expectations, particularly among younger borrowers. Many individuals in the Gen Z and Millennial demographics demand quick and personalized credit solutions, often indicating a willingness to switch providers if their digital experience falls short. The report highlights that over half of these younger customers would leave their financial institution due to dissatisfaction with the digital process.
Consumer Priorities and Embedded Lending
As financial institutions adapt, they are prioritizing three key consumer demands for 2030: speed, personalization, and transparency. Specifically, 44 percent of survey participants noted that customers desire a frictionless borrowing experience, while 40 percent seek highly personalized credit products. Additionally, 38 percent expressed a need for greater visibility into fees and decision-making processes.
There is a noticeable trend towards embedded lending, where credit decisions occur directly within e-commerce platforms or accounting tools, bypassing traditional banking portals. This approach aims to streamline the borrowing process, but it also presents challenges in fraud detection. As underwriting becomes quicker and more efficient, fraudsters are adapting to exploit low-friction systems that eliminate conventional checkpoints, like manual reviews and two-factor authentication.
In fact, fraud risk emerged as the primary challenge for underwriting effectiveness in half of the countries surveyed, including the United States and United Kingdom. A substantial 94 percent of respondents believe that fraud prevention will remain a top priority for financial institutions over the next five years.
The Role of AI and Alternative Data
Looking ahead, AI is expected to play a pivotal role in the underwriting process. By 2030, respondents envision a future where AI-driven systems act on behalf of customers for tasks such as product comparisons, identity verification, and even negotiating terms. Despite this shift, 77 percent of participants believe that human oversight will continue to be essential, especially for complex or high-value cases.
The report also underscores the importance of integrating alternative data sources, including payroll, e-commerce, and telecommunications records, to enhance decision-making for thin-file or underserved customers. Notably, 84 percent of those surveyed indicated that credit bureaus must incorporate alternative data to maintain competitiveness in the evolving landscape.
Synthetic data is anticipated to play a larger role in this transformation, offering a means to simulate real-world data without compromising sensitive information. This approach has the potential to reduce bias and foster inclusivity within credit models. Furthermore, many institutions are likely to adopt a partnership model, with more than 60 percent of respondents planning to outsource elements of their underwriting processes, such as data collection and fraud detection.
As financial institutions navigate this transition, ensuring the security of AI systems will be critical. Fraudsters may seek to exploit these technologies by inserting stolen data or issuing false instructions. Therefore, maintaining customer trust and transparency will be essential as the industry moves towards a more automated future.
