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AI in Credit Scoring · Artificial Intelligence Exposed

• 0:00
  Speaker 1: Okay, so today we're taking a deep dive into something
• 0:02
  Speaker 1: that affects all of us credit scores. Yeah, definitely, I
• 0:06
  Speaker 1: know what you're thinking. Yeah, credit scores not exactly the
• 0:09
  Speaker 1: most thrilling topic, right, but trust me, when you throw
• 0:13
  Speaker 1: AI into the mix, things get a lot more interesting.
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  Speaker 2: Oh. Absolutely. AI is poised to reshape so much about
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  Speaker 2: financial opportunity and inclusion, potentially changing who even gets access
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  Speaker 2: to credit and just how it's all done.
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  Speaker 1: And the old system, you know, the one where the
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  Speaker 1: FICO score is king, right, it definitely has some serious limitations.
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  Speaker 1: It's basically judging you based on your borrowing history, like
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  Speaker 1: trying to predict the future based on what you did yesterday.
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  Speaker 2: Exactly like traditional credit scoring, it often just misses all
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  Speaker 2: the little details and nuances of an individual's financial situation. Yeah,
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  Speaker 2: but AI can take into account so much more and
• 0:51
  Speaker 2: give us a much more complete picture.
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  Speaker 1: So instead of just checking if I paid that credit
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  Speaker 1: card bill on time, AI can dig deeper. What other
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  Speaker 1: kind of information are we talking about?
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  Speaker 2: Well, think about it this way. AI can analyze things
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  Speaker 2: like you're spending habits, not just how much you spend,
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  Speaker 2: but where you're spending and what you're spending on. It
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  Speaker 2: can look at how consistent you are with paying your bills,
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  Speaker 2: the timing of when you get your income and get this,
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  Speaker 2: even stuff on social media.
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  Speaker 1: Wait, hold on social media. So if I'm posting about
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  Speaker 1: my vacation, my credit score is going to take a hit.
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  Speaker 2: No, No, not exactly like that. It's more about using
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  Speaker 2: it to identify patterns trends. Say someone's posting a lot
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  Speaker 2: about saving for a down payment on a house. That
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  Speaker 2: can mean they're pretty responsible with their money and have
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  Speaker 2: long term goals, something a traditional credit score wouldn't even
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  Speaker 2: pick up on.
• 1:38
  Speaker 1: Interesting. So AI can kind of read between the lines
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  Speaker 1: get a better sense of who we are financially than
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  Speaker 1: just as simple number.
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  Speaker 2: Precisely, financial health has so many different sides to it.
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  Speaker 2: And the great thing about AI these algorithms, they're designed
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  Speaker 2: to constantly learn adapt as they take in more data.
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  Speaker 1: So instead of a score that just sits there, it's
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  Speaker 1: always changing, evolving. That's pretty power, it really is.
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  Speaker 2: This opens doors for people who've been traditionally excluded from
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  Speaker 2: the whole credit system, people we sometimes call credit invisible.
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  Speaker 2: Imagine someone new to the country or a young adult
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  Speaker 2: just starting out. They may not have a long credit history,
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  Speaker 2: but they consistently pay their rent their utility bills on time.
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  Speaker 1: So in the past, all that responsible behavior wouldn't really
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  Speaker 1: help their credit score.
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  Speaker 2: Yeah, unfortunately not much. But AI can see those positive
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  Speaker 2: financial patterns even outside the usual lending stuff, and that
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  Speaker 2: can really level the playing field for a lot of folks.
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  Speaker 1: So it's almost like AI is creating a more personalized
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  Speaker 1: understanding of each person's financial life.
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  Speaker 2: You could put it that way. AI has the potential
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  Speaker 2: to assess credit worthiness on a much deeper level, leading
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  Speaker 2: to more accurate and fairer lending decisions.
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  Speaker 1: This all sounds incredibly promising, but I know AI is
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  Speaker 1: not perfect. What about bias? There are all those stories
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  Speaker 1: about algorithms actually making existing inequalities worse. How can we
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  Speaker 1: be sure AI, how our credit scoring is going to
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  Speaker 1: be truly fair?
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  Speaker 2: That's the million dollar question, and it's one developers of
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  Speaker 2: these systems are really thinking hard about. The key is
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  Speaker 2: building and training these algorithms responsibly, being super careful about
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  Speaker 2: what data is used, and constantly monitoring the system for
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  Speaker 2: any signs of bias, even if it's unintentional. It's like
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  Speaker 2: checking and adjusting a compass to make sure it's always
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  Speaker 2: pointing true north.
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  Speaker 1: So it's not a set it and forget it technology.
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  Speaker 1: It needs constant attention.
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  Speaker 2: Absolutely, it's a field that's always changing. Ensuring fairness that's
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  Speaker 2: a top priority.
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  Speaker 1: After all.
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  Speaker 2: We want AI to help create a more inclusive and
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  Speaker 2: equitable financial system, not just repeat the same problem.
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  Speaker 1: Right. Absolutely, and we've talked about inclusivity and fairness, but
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  Speaker 1: AI also brings another big plus to the table. Speed.
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  Speaker 1: Remember the old days waiting for a loan decision. Oh yeah, definitely,
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  Speaker 1: it could feel like forever.
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  Speaker 2: It could feel like an eternity. Remember how long it
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  Speaker 2: took to get that first credit card approved, all the paperwork,
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  Speaker 2: weeks of waiting. It was brutal. AI can process huge
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  Speaker 2: amounts of data so fast it could change everything.
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  Speaker 1: That is a serious game changer. Think about needing emergency
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  Speaker 1: funds and you could get a loan decision in hours,
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  Speaker 1: not weeks.
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  Speaker 2: That's the power of AI, streamlining everything, making it faster
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  Speaker 2: and more efficient for everyone. And it's not just about speed.
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  Speaker 2: It's about giving people timely access to financial help right
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  Speaker 2: when they need it most.
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  Speaker 1: It'd be a game changer, especially in situations where every
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  Speaker 1: minute counts. We're already seeing AI being used in developed economies,
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  Speaker 1: but what about emerging markets, places where traditional credit systems
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  Speaker 1: are really limited.
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  Speaker 2: Oh, it could be revolutionary for global financial inclusion. Imagine
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  Speaker 2: folks in developing countries who use mobile money but don't
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  Speaker 2: have those formal credit histories. AI could analyze their transactions,
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  Speaker 2: give them access to credit they never had before.
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  Speaker 1: Opening up a whole new world of financial opportunity, not
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  Speaker 1: just for individuals but entire economies. And it all starts
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  Speaker 1: by rethinking what credit worthy even means in this age
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  Speaker 1: of AI. Right, that's a great point. Yeah, we're gonna
• 5:02
  Speaker 1: take a quick break, but when we come back, we'll
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  Speaker 1: delve even deeper into how AI is being used today
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  Speaker 1: and explore what this all means for the future of finance.
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  Speaker 1: So stick with us.
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  Speaker 2: Yeah, it does feel like, you know, a total revolution
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  Speaker 2: is coming and how we think about credit and financial opportunity.
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  Speaker 2: And the coolest thing, it's like this tech it's just
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  Speaker 2: getting better and better, more sophisticated every day.
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  Speaker 1: It's amazing to think about all the possibilities, But it
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  Speaker 1: also kind of makes you wonder, how does AI actually
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  Speaker 1: figure out if someone's credit worthy? I mean, what's happening
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  Speaker 1: inside those algorithms. Great question.
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  Speaker 2: It's important to remember that AI doesn't work like a
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  Speaker 2: magic formula, you know. It's not like it has some
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  Speaker 2: fixed definition of credit worthiness. It's more about spotting those
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  Speaker 2: patterns and trends that usually means someone is financially stable
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  Speaker 2: and responsible.
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  Speaker 1: So it's not just a bunch of hard and fast rules.
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  Speaker 1: It's more like looking for signs that someone is good
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  Speaker 1: at managing their money exactly.
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  Speaker 2: For instance, AI my look at how steady your income is,
• 6:02
  Speaker 2: your debt to income ratio, you know, how you manage
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  Speaker 2: your monthly expenses. It might even look at how long
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  Speaker 2: you've been at your current job.
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  Speaker 1: So it's building up a way more detailed picture of
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  Speaker 1: someone's financial life than a traditional credit score could.
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  Speaker 2: Definitely, AI goes deeper into those little details, the complexities
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  Speaker 2: of your financial behavior, things a simple credit score could
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  Speaker 2: never capture.
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  Speaker 1: But if these algorithms are always learning and changing, doesn't
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  Speaker 1: that make them a little bit of a black box,
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  Speaker 1: Like how can we know for sure they're making fair decisions,
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  Speaker 1: not biased ones.
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  Speaker 2: Transparency, that's the key the people developing these AI systems.
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  Speaker 2: They need to make sure their algorithms are constantly checked.
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  Speaker 2: They have to be sure they're not just making existing
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  Speaker 2: biases worse or discriminating against certain groups.
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  Speaker 1: So it's not just about the technology itself. It's also
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  Speaker 1: about the choices the developers make. Yeah, and the data
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  Speaker 1: they use to train those models.
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  Speaker 2: You got it. This is all driven by people. We
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  Speaker 2: need accountability transparency from the companies and institututions using AI
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  Speaker 2: for credit scoring. Consumers have the right to know how
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  Speaker 2: those decisions are being made, what factors are being considered.
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  Speaker 1: It's like we're at a turning point, heading into this
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  Speaker 1: whole new era of finance where algorithms are going to
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  Speaker 1: play a bigger and bigger role. It's both exciting and
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  Speaker 1: a little scary, to be.
• 7:17
  Speaker 2: Honest, I think you hit the nail on the head there.
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  Speaker 2: We can't just sit back and watch. We need to
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  Speaker 2: talk about all this openly and honestly about the implications
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  Speaker 2: of AI in credit scoring.
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  Speaker 1: Couldn't agree more. So, Let's bring this back down to
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  Speaker 1: earth for a minute. How is AI actually being used
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  Speaker 1: out there in the real world when it comes to
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  Speaker 1: credit scores. Is this still something futuristic or is it
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  Speaker 1: already happening?
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  Speaker 2: Oh? AI is already making waves throughout the financial world.
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  Speaker 2: Lots of fintech companies, even traditional banks, are using AI
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  Speaker 2: power tools.
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  Speaker 1: So we're not just talking about something way off in
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  Speaker 1: the future. It's already affecting our wallets and.
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  Speaker 2: Bank accounts exactly. For example, some lenders are using AI
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  Speaker 2: to look at alternative data, things like rental payment history
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  Speaker 2: or utility. This way they can evaluate someone's credit worthiness
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  Speaker 2: even if they don't have a long credit history.
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  Speaker 1: That's a big deal for people who have been shut
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  Speaker 1: out by the traditional system. It feels like AI is
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  Speaker 1: creating opportunities that weren't there before.
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  Speaker 2: That's the whole point, and we're just getting started. AI
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  Speaker 2: can also be used to personalize loan offers, spot fraud,
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  Speaker 2: and even give financial advice, so it's kind of.
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  Speaker 1: Like AI is evolving into the ultimate personal financial assistant.
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  Speaker 2: You could say that AI gives consumers more power, you know,
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  Speaker 2: with tools and information to make smarter financial decisions reach
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  Speaker 2: their goals.
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  Speaker 1: It all sounds super promising. But as we're exploring all this,
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  Speaker 1: are there any downsides, any risks we should be thinking about?
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  Speaker 2: Of course, just like any tech, AI has limitations and
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  Speaker 2: potential problems. One thing is data security and privacy. These
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  Speaker 2: systems rely on so much personal data. Making sure that
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  Speaker 2: information is safe that's a big deal.
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  Speaker 1: We've all heard the horror stories about data breaches and
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  Speaker 1: identity theft. It's scary to think what could happen if
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  Speaker 1: that kind of sensitive financial data ended up in the
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  Speaker 1: wrong hands.
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  Speaker 2: No doubt. That's why we need strong cybersecurity measures in place,
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  Speaker 2: and people should choose financial institutions that prioritize data protection.
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  Speaker 1: So it's all about striking that balance, embracing AI, but
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  Speaker 1: making sure our information is protected.
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  Speaker 2: Finding that sweet spot. That's what's key.
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  Speaker 1: So we've covered the potential upsides and downsides of AI
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  Speaker 1: and credit scoring. Sounds like this technology is going to
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  Speaker 1: have a big impact on our financial lives moving forward.
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  Speaker 2: Definitely, and as AI gets even smarter, it'll be more
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  Speaker 2: important than ever to have open and honest conversations about
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  Speaker 2: how it's being used in finance.
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  Speaker 1: You're right about that. This conversation has been really eye opening,
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  Speaker 1: and it feels like we've just scratched the surface of
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  Speaker 1: this whole topic.
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  Speaker 2: It's fascinating stuff.
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  Speaker 1: It really is. So let's dive into the future. What
• 9:47
  Speaker 1: can we expect in the years to come.
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  Speaker 2: Now, that's where things get really interesting. The future is
• 9:53
  Speaker 2: so exciting and it's hard to even imagine how big
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  Speaker 2: of an impact AI will have on finance. Just imagine
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  Speaker 2: world where access to credit isn't limited by your past,
• 10:03
  Speaker 2: you know, but by what you could achieve in the future.
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  Speaker 1: The world where credit isn't about what you've done, but
• 10:09
  Speaker 1: what you could do exactly. Can you give us some examples,
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  Speaker 1: like how would that work in real life?
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  Speaker 2: One area that I think is going to be huge
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  Speaker 2: is predictive analytics. Imagine AI looking at tons of data,
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  Speaker 2: your spending, habits, your career path, all of it to
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  Speaker 2: try and predict your future income and credit worthiness.
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  Speaker 1: So instead of looking back, AI can look ahead see
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  Speaker 1: where you're capable of.
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  Speaker 2: That's the idea. It could be a real game changer
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  Speaker 2: for say young people just starting out, entrepreneurs with new ventures,
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  Speaker 2: anyone whose credit score doesn't tell the whole story of
• 10:40
  Speaker 2: their financial potential.
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  Speaker 1: It's almost like breaking free from the old ways of
• 10:43
  Speaker 1: doing things. What other innovations are coming down the pipeline.
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  Speaker 2: Personalized financial products. That's another exciting area. AI could create
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  Speaker 2: financial products that are just for you, tailor to your
• 10:53
  Speaker 2: needs and goals. Think about credit card offers, loans, investment
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  Speaker 2: strategies all perfectly matched to your situation.
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  Speaker 1: Wow, that's way different from the one size fits all
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  Speaker 1: approach we have. Now it's like having your own AI
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  Speaker 1: financial advisor.
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  Speaker 2: Yeah, kind of like that. AI can give people the
• 11:09
  Speaker 2: tools and knowledge to make smarter decisions about their money,
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  Speaker 2: help them reach their goals.
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  Speaker 1: It all sounds amazing, but as we wrap up this
• 11:16
  Speaker 1: deep dive, we have to talk about the challenges that
• 11:18
  Speaker 1: come with new technology like this. We've mentioned bias, privacy, security,
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  Speaker 1: How do we handle those as AI becomes even more
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  Speaker 1: a part of the financial system.
• 11:28
  Speaker 2: Such an important point. We can't just focus on the
• 11:30
  Speaker 2: good stuff and ignore the potential problems. Transparency and accountability,
• 11:34
  Speaker 2: those are crucial the developers. They need to be open
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  Speaker 2: about how their algorithms work, what data they use, what
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  Speaker 2: steps they're taking to deal with potential biases.
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  Speaker 1: It's about trust right, making sure AI is used ethically
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  Speaker 1: and responsibly.
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  Speaker 2: One hundred percent, and it's got to be a team effort.
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  Speaker 2: Industry leaders, policymakers and us the consumers. We all need
• 11:54
  Speaker 2: to work together to shape the future of AI and finance.
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  Speaker 2: Make sure it's creating a system that's fair, inclusive, and
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  Speaker 2: safe for everyone.
• 12:02
  Speaker 1: Absolutely. It's clear we're just starting to understand the potential
• 12:06
  Speaker 1: of AI in finance. It's a really fascinating journey. I'm
• 12:09
  Speaker 1: excited to see what happens next. Thanks for joining us
• 12:11
  Speaker 1: for this deep dive into AI in credit scoring.
• 12:13
  Speaker 2: Thanks for having me, it's been great.