Revolutionising Education Lending in India: The Impact of Artificial Intelligence and Machine Learning

By Samir Mohanty

Industry 4.0 has transformed business operations across sectors and geographies led by emerging technologies such as Artificial Intelligence (AI) and Machine Learning (ML). The digital revolution is reshaping the operational landscape of financial institutions, too, further breaking down barriers, embracing innovation, and ultimately providing enhanced value to customers by aligning with their evolving needs and preferences.

Rapid advancements in AI and ML have permeated every aspect of the financial sector, right from onboarding to risk management. AI & ML have taken centre stage in this development as the education lending industry continues to evolve. These technologies have the potential to transform the way students finance their education and make higher education more accessible to a wider range of aspirants.

Transformation of the education lending space through AI and ML

Captured below are a few ways in which AI and ML have been the primary catalysts for triggering a massive and positive change in the operational dynamics of financial institutions:

1. Customer mapping: AI and ML systems have revolutionised the credit assessment process by leveraging vast amounts of data and analysing borrower profiles more efficiently. Predictive analysis based on buying patterns, social behaviour, financial profile, and historical data gives in-depth insights. This advancement through AI and ML has bridged the financial gap to access quality education without any financial constraints. The financiers evaluate parameters such as academic scores, entrance scores, and the pedigree of the university as well as course to determine students’ employability scores using AI and ML-based solutions.
2. Customer Onboarding: Through AI-powered algorithms, NBFCs can automate and expedite the traditionally time-consuming and manual procedures involved in onboarding customers. By analysing vast amounts of data, these technologies enable financial institutions to assess the creditworthiness of prospective borrowers more accurately and efficiently. Additionally, AI-driven systems can verify and authenticate customer information, ensuring compliance with regulatory requirements while reducing the risk of fraud.
3. Customised solutions: AL & ML tools provide meaningful insights into digital transactions and buying patterns of customers to deliver value propositions. Lending institutions, including specialised education-focused NBFCs, have stepped up to provide hyper-personalised education financing solutions to enable students to fulfil their academic aspirations. As a part of this approach, a thorough evaluation of the student’s profile, past academic performance, alternate data available through social chatter, third-party verification, etc., takes place. An amalgamation of alternate data and traditional information is incorporated to create customised offerings.
4. Security: To combat data breaches, cybercrimes, data exfiltration, and phishing, various technological tools must be in place. Furthermore, the KYC verification process eliminates instances of identity theft. Multi-level security through AI and ML has ensured data privacy and prevention of fraud, thereby providing a hassle-free and smooth experience.
5. Risk Management: Financial institutions have to deal with multiple risks, such as Credit Risk, Operational Risk, Market Risk, Compliance Risk, and Cyber & Information Security Risks, to name a few. Right technological integration enables organisations to identify such risks in advance and raise a red flag, assisting them in assessing the risks and taking the necessary actions to mitigate them. These risk management technologies are employed at the customer, organisation and system level.
6. Customer experience: By leveraging AI and ML, lenders gather and evaluate vast amounts of customer data to analyse and gain valuable insights into individual preferences, behaviours, and needs. This allows them to personalise their services and offerings, tailoring them to each customer’s unique requirements. AI-powered chatbots and virtual assistants provide real-time assistance, addressing customer queries and concerns promptly. With these advancements, AI & ML empower education-focused NBFCs, deliver exceptional customer experiences, and build trust and loyalty. This ultimately leads to cementing long-term relationships with their customers, which leads to superior customer experience and delight.

In India, the landscape of education lending is changing because of artificial intelligence and machine learning, thereby promoting better inclusion, efficiency, and accessibility. This has enabled a better governance framework, knowledge, and robust processes to promote organisational transparency. This enhancement through technology allows faster decision-making, process automation, fraud prevention & detection, risk management, quick underwriting, simplified & swift loan disbursement processes and hyper-personalised financial solutions, further minimising the issue of non-performing assets. By leveraging these technological innovations, financial lenders precisely determine creditworthiness, speed up loan disbursal, and guarantee financial inclusion for prospective students across the nation.

(The author is Samir Mohanty, Chief Transformation Officer, Avanse Financial Services, and the views expressed in this article are his own)