Mellon Bank Corp. is installing a system that uses artificial intelligence to support its consumer-lending decisions. The Pittsburgh-based super-regional is implementing the system which combines rule-based models, statistical scoring, and neural networks to supplement its own automated in-house underwriting and decision support and credit-scoring operation.
The hybrid system, supplied by HNC Software Inc., will be used in Mellon's secondary-loan area to aid in evaluating secured and unsecured consumer-lending decisions.
James D. Morrill, the senior vice president in charge of Mellon's loan-management group, would not disclose the price of the system but valued it at less than $1 million.
Mr. Morrill added that the bank intended to break even on its investment in less than one year.
The system, called Colleague, should be fully integrated and operational by the end of the year, he said.
"We looked at quite a number of artificial intelligence and rule-based systems, and this was the best one out there," Mr. Morrill said.
"We have a similar model working in first mortgages to allow us to look for relationships [among our customers] that we can't see," he added.
Mellon will use Colleague to help in cross-selling products to its customers, predicting market response, and studying the issues of customer retention and attrition.
The neural network component acts as the base for this relational decision making. Like a human brain, the neural network can learn from examples and uncover patterns and-relationships within a database, processing this information as quickly as a computer.
HNC, a maker of several neural network-based products, also provides a similar decision-support system for smaller banks, called Aquarius. Aquarius is provided to customers largely through servicing arrangements with vendors such as the Mortgage Guarantee Insurance Corp.
HNC has 14 bank customers using either Colleague or Aquarius or both, according to Patricia D. Campbell, a direct-marketing manager for HNC. In addition to this deal, $37 billion-asset Mellon also recently signed on to use HNC's product for its first-mortgage area.
