Weekly Wrap: Automation fintech Blend plots public offering, defining fairness for AI

In this week’s episode of “The Buzz,” Bank Automation News discusses banking process automation platform Blend’s IPO plans and how they relate to overall gains automation has made in the financial services sector during the past year. Blend Labs experienced 90% year-over-year revenue growth to $96.0 million in 2020 from $50.7 million in 2019. The company’s 291 customers include 31 of the top financial services firms in the U.S., by total assets managed. Wells Fargo , U.S. Bank , M&T Bank , Truist , BMO Harris Bank , Elements Financial Federal Credit Union and Mountain American Credit Union were specifically mentioned in the firm’s Monday S-1 filing. The BAN team also explored differences in legal definitions of fair lending and how mathematics perceives of it as a construct. With financial institutions moving toward integrating artificial intelligence-powered systems into the underwriting process, sustained engagement among firms and regulators might be necessary to ensure access to credit remains equitable. Find a discussion of these topics and more in today’s episode of the Weekly Wrap with Editor Myra Thomas and Associate Editors Jaspreet Kalra and Loraine Lawson for the week ended June 25, 2021. Subscribe to The Buzz Podcast on iTunes , Spotify , or download the episode .

The following is a transcript generated by AI technology that has been lightly edited but still contains errors. Myra Thomas Hi, everyone. I'm Myra Thomas, editor of bank automation news and welcome to the buzz, where we explore how automation technology is transforming the banking industry. This is our weekly wrap for what's happening in the industry, ending this week, June 25 2021. And before I begin, I'd like to give a big thanks. Thanks to being its band sponsors and advertisers, MX and zeta technologies. Thanks so much for your support. I'm pleased today to be joined by Lorraine Lawson, Associate Editor and Jaspreet Kalra, associate editor here bank automation news. Here are the biggest news items from our editorial team this week. And before I mentioned that, I forgot to mention some of the big news happening around a key inflation measure measure. The index tracking personal consumption hit its highest level since 1992. As may prices once again rose prices Previously, we could point to the pandemic materials shortages as well as supply chain issues have contributed to price increases over the past few months. Looking ahead, Amazon is ready to face one of its biggest union fights ever. And in the tech world, Microsoft hits a landmark $2 trillion market cap. So let's look back quickly at some stories that we went over this week. Goldman Sachs is rolling out a transient transaction banking operations in the UK. And we spoke with one of their executives on the engineering side who revealed to us that the next step is rollout to locations in Europe by the beginning of 2022. Also, banking Process Automation FinTech blend labs recent IPO and exponential growth was profiled in a story by Lorraine Lawson, maybe you can give us some key findings. from looking at that story. What's accounting for the exponential growth at blend labs spray Loraine Lawson blend had 90% year over year revenue growth in 2020. From 2019. I think there are a couple of things one we see. Well, first of all, we see the thirst that banks have for automation. It specifically cited how it is automated and how much it banks had saved using their tools, of course, as part of their marketing. But it was interesting to see the data on that US Bank, for instance, it cut the mortgage loan cycle by 10 days on average and reduced home equity loan cycles from 40 days to 21 days. At VMO. Harris bank, they saved over 100,000 hours of processing time for Home Equity applications in a year. And they decrease their digital Home Equity applications by 253%. year over year, from 2018 to 2018. I think you know, in the past year, definitely what we've heard from sources I'm sure to speak will agree with this is that COVID had a huge role in bass wanting to digitalize people weren't in the office, they didn't want to handle papers. So COVID definitely was probably a good business for blend. Myra Thomas I just wonder what's going to happen once we get past this, you know, whole pandemic. Um, you know, we're hearing a lot from FinTech leaders who have benefited from the pandemic, I know that we've seen a wave of a variety of different businesses who've been able to tap into the small business and midsize business market because of the need to digitize. I'm just wondering, you know, blend and, you know, other firms how they're going to plot, you know, in the future for, you know, less than exponential growth. Any thoughts? Any thoughts, guys? Loraine Lawson Think the automation echo headline, I don't think the automation trend is gonna end anytime soon, when you see banks having savings, literally half the time to close a loan. They're not going to walk away from that anytime soon. And Linda's only expanding its offering. So I think they'll continue to see significant growth and we're sort of in a FinTech boom right now. So that's part of it. Um, but did you have to say just, Jaspreet Kalra I was just saying that my point was very similar to what Lorraine just said, in the sense that these processes are really here to stay. And other things I keep hearing from sources is that the pandemic really exposed human beings as part of being the friction in some of these processes. And when you make that sort of efficiency gain, it's hard to give that up. But at the same time, one of the risk factors that blend itself mentioned in their perspectives is that this sort of explosive growth may not be repeatable, but that doesn't mean necessarily mean they won't grow. Myra Thomas Sure, maybe you can talk a little bit just freed about the interesting podcast, you had an interesting interview with an individual from Virginia Tech, who was talking about fairness and AI, in credit, underwriting the whole social theory behind it. And, you know, she wasn't quite clear to me about how this might be implemented, but talk a little bit about what she was saying. Jaspreet Kalra Right. So I spoke with Professor Janine Hilah, who teaches at the Brampton college at Virginia Tech. And her research areas are like the intersection of business law and technology. And our conversation was largely focused on how there is a difference between how laws define fairness, and how mathematics which is sort of the back end of all those AI models, really is trying to define fairness like in her words, there's 24, different definitions of fairness within mathematics. So there's no clear cut picture of what it might be. And that sort of extends to this overall trend, we've been seeing where companies are interested in using AI for credit underwriting. But at the same time, there are concerns of bias that also rise up and one example that she gave me of this proposed social technical approach of building regulation around AI is that if there's two towns that are trying to build a bridge across the river, oftentimes one town will say, put it in place x and one town, the other town will say, don't put it in place x. So what you have to really do is instead of building as a straight line, you have to carve it at some point. So it's like accommodating both societal expectations and the technical efficiency simultaneously, instead of doing the technical part first, and then saying, Hey, does it align with the social expectations as well? So there needs to be an overall growing conversation about how one thinks about fairness in AI, and how one thinks about fairness in the eye underwriting, and that was her overall takeaway from our conversation. Myra Thomas So you know, as far as regulators, they always seem to, you know, come after the technology and not necessarily before it, even though there's been quite a, you know, a lot of talk about regulating regulating AI and fairness and underwriting but what sense do you get that the regulator's you're going to be ahead of the game. Jaspreet Kalra Um, so the point that she raised here was that a, the structures are sort of outdated in terms of looking at how we're understanding fairness and how to understand fairness, especially given credit. But the other sort of spectrum of it is that the pharmaceutical industry also has this entire business model built around New technology and protecting their IP, but at the same time, their products have to be checked for safety. So there are methods that fought through which regulators can check that okay, this model is validated for fairness, and does not exactly replicate biases of the past. But at the same time, I think this is going to be a push and pull conversation for quite a bit instead of just being the regulator saying do this, and the firm's just aligning to that. Myra Thomas Sure. Well, we'll cut it there. I just want to thank you so much, and everyone so much, our associate editors here for joining us for the weekly wrap on the buzz. Let's take a second to give a look ahead for stories we're working on for this coming week. Our inside look column will feature deep dive into the automation efforts of Utah headquartered tap bank, the digital bank started out with rather humble beginnings offering services, financial products, to truckers, operating a truck stop kiosks, to moving towards being a fully digital bank. Lorraine, can you update our listeners on your intelligent document processing story? Loraine Lawson Yes, we're looking at the market and how it's evolving and what vendors are doing to make it easier for banks and financial institutions to implement ibp. Myra Thomas Just read I know you're also working on defy explainer, which we'll take a deep dive into it. Maybe you can give us a heads up. Jaspreet Kalra So yeah, I'm starting to look into the world of decentralized finance, which long story short, is pitching itself as an alternative to the traditional financial system, which would basically mean that instead of getting a loan by walking into a bank, you'll just get a loan by talking to a automated protocol online. Myra Thomas Thanks, everyone, for joining us for the buzz. For more podcast content, check out bank automation news calm and search for the buzz. From bank automation news on iTunes and Spotify.

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