Mizuho and SoftBank use AI for consumer loan screening
TOKYO – A consumer lender owned by SoftBank Group and Mizuho Bank on Monday launched a loan service that uses artificial intelligence to assess applicants’ repayment capacity, targeting younger clients through easier access to borrowing .
J.Score’s service, a 50-50 joint venture of SoftBank and the Mizuho Financial Group banking unit, calculates an individual’s credit score through 18 questions regarding age and education, between others.
An additional 140-150 optional personality and leisure questions allow for more detailed assessments by determining spending patterns and repayment attitudes and other characteristics.
Most of the personal loan selection processes focus primarily on current income. This often results in high interest rates and small loans for low income youth. By using AI to predict future revenue, J.Score aims to cultivate younger customers with great revenue potential.
Loans will range from 100,000 yen to 10 million yen ($ 890 to $ 89,060) and will be capped at one-third of an individual’s income. Interest rates will be between 0.9% and 12% per annum, one of the lowest levels in the industry, according to J.Score. The consumer finance company aims to bring loan balances to over 500 billion yen over the next decade. J.Score runs his business with just a few dozen employees and does not operate in physical stores, with the goal of turning low trading costs into lower interest rates.
The fact that Mizuho does not have its own personal loan department has worked to its advantage since the bank does not have to worry about two unit competition. But since his rival mega-banks all have their own consumer credit units, Mizuho predicts that it will be difficult for them to get into AI lending.