Banc One Corp., First Union Corp., and Huntington Bancshares are testing artificial-intelligence software designed to improve commercial lending procedures.
The software stems from a more costly system, called Lending Adviser, that was marketed in the late 1980s by Syntelligence Inc. Many bankers said they liked that system but shied away because it was costly and unproven.
The new version of Lending Adviser, for personal computer, is marketed by Crowe Chizek & Co. of South Bend, Ind. It is one of the firms that took over Syntelligence when it went bankrupt in late 1990.
Lending Adviser, using a form of artificial intelligence called an expert system, incorporates the expertise of bankers to evaluate and help make decisions about commercial loan applications.
The software can also be used to train new lenders.
Risks and Benefits
Though some bankers are enthusiastic about the benefits of artificial intelligence, others say the technology is risky and incapable of getting to the root of commercial loan problems.
Systems that run on mainframes, like the original Lending Adviser, are especially risky because they required sizable investment up front from a bank. PC-based systems, less expensive, could make expert systems more popular.
Lending Adviser was the first comprehensive attempt to use expert systems in commercial lending. The mainframe software was installed at a handful of bank companies, including Integra Financial Corp. in Pittsburg, Canadian Imperial Bank of Commerce in Toronto, and Indiana National Bank.
Crowe Chizek is charging banks several thousand dollars for the opportunity to test the PC-based version for a few months.
When that period ends, a user must pay a $100,000 licensing fee to continue testing the software.
At the end of a year, the bank must decide whether to go ahead with a full-fledged system, which could cost between $350,000 and $1 million.
"We're trying to take away the risk of a bank getting into this without knowing what they're doing," said Marc Brammer, director, Crowe Chizek.
First Union Has First License
The aim is to have a bank "slowly integrate" the product into its lending culture, he added.
So far, the only bank company to license the software is First Union Corp., Mr. Brammer said; the others are in earlier stages of testing.
Charlotte, N.C.-based First Union is using the software for loan underwriting and credit reviews of existing loans, he said. The software will flag a loan if key indicators show deterioration.
About 40 loan officers at Banc One's Indianapolis subsidiary are testing the software to see if it comes to the same conclusions they would, according to the software vendor. Spokesmen at Banc One and Huntington confirmed the banks were testing the software, but declined to provide details.
Canadian Imperial has been using the mainframe version of Lending Adviser for about two years. "It gives us more consistent treatment of customers and better on-line training for lending officers," said J. David Gibb, senior vice president of the bank's credit quality and portfolio management division.
Mr. Gibb said the bank would soon begin using the system for portfolio management.
Crowe Chizek said it invested $500,000 for $1 million in getting the PC-based version out the door. It has the same features as the mainframe version and runs under the OS/2 operating system.
