Hawaii's American Savings Tries Artificial Intelligence

A Honolulu-based bank is installing a consumer lending system that uses artificial intelligence to increase expertise at retail branches.

American Savings Bank, a $2 billion-asset subsidiary of Hawaiian Electric Industries Inc., said last week that it is installing Loan Guide, a microcomputer-based system that helps lending officers evaluate prospective consumer loans.

Loan Guide is an expert system, a kind of artificial-intelligence software.

The bank expects to have the system running in its main branch this month and in all 45 branches by next year's second quarter.

A Software Rarity

Only a few banks have installed expert systems, which are expensive and complex to develop. The attraction is help in streamlining customer service while coping with frequent changes in lending policies and high turnover among platform personnel.

Wayne Minami, American Savings' president and CEO, said turnover in the Hawaii branches is particularly hard to stem and unemployment of less than 3% makes replacements hard to find.

Loan Guide, which American Savings developed with Consolidated Technical Support Inc., a Houston-based software firm, is the first microcomputer-based expert system to integrate all aspects of consumer lending.

"The system can analyze a loan based on our loan underwriting guidelines and give us a first cut on whether it can be approved," Mr. Minami said.

The software, which includes an automated interface to credit bureaus, advises loan officers.

Decisions in 20 Minutes

Loan Guide shortens the daylong process of approving or denying a loan to about 20 minutes, official said.

The system is set up to reflect the bank's policies regarding risk and profit margins. Changes are input by the bank's head office, so whenever loan officers access the system they see the most up-to-date version.

Loan Guide can laser-print forms and documents that the bank and government agencies require. The government often changes forms. "and we may change our own policies," Mr. Minami said. "It's hard to keep current."

American Savings Bank is also using a software module that forecasts the probability that a loan will go bad.

$2,000 per Branch

Loan Guide is available to other banks. Installation, including a computer, would typically cost $2,000 to $4,000 per branch, said Samuel R. Beard, president of Consolidated Technical Support. However, most banks have suitable computers.

Total cost would be around $50,000 for banks with assets of less than $1 billion, $100,000 for larger banks, Mr. Beard said.

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