Generative artificial intelligence (GenAI) is increasingly shaping the future of lending in the Asia-Pacific (APAC) banking sector, according to insights from Yi Chen, Managing Director for the APAC-Middle East region at Moody's Banking. In a recent discussion, Chen highlighted how GenAI and related technologies are moving beyond traditional uses of AI in banking, which have historically focused on data analysis and risk measurement.

Chen explained that commercial lending processes have often been manual and susceptible to errors. "Traditional banking processes, especially in commercial lending, are often manual, labor-intensive, and prone to errors. AI-led solutions offer a powerful alternative by helping to automate these tasks and minimize manual work - fostering improved consistency, efficiency and timely decision-making," Chen said.

The use of GenAI in credit assessments allows banks to analyze large volumes of both structured financial data and alternative sources such as social media or utility payment histories. This provides lenders with a more nuanced understanding of credit risk in real time. "This not only helps to speed up the credit assessment process but also provides a more nuanced, real-time understanding of credit risk, which is crucial for making well-informed lending decisions," Chen noted.

In addition to improving assessments, GenAI enables continuous monitoring of loan portfolios. It can identify risks early so banks can intervene promptly. The technology also supports customer expectations for seamless digital experiences by accelerating application processes from origination through approval.

Regarding operational improvements, Chen pointed out that automating repetitive tasks during loan origination reduces approval times and manual workload. Automated solutions quickly analyze financial statements while supporting underwriting with comprehensive borrower profiles. "GenAI can streamline the loan origination process by automating repetitive tasks and reducing approval times... GenAI can offer a comprehensive view of a borrower's creditworthiness, allowing for faster and better-informed credit decisions," he said.

Entity verification and know-your-customer (KYC) checks are also enhanced by GenAI automation. This not only speeds up processing but strengthens security measures against fraud.

Despite these benefits, APAC banks face challenges integrating GenAI due to diverse regulatory environments across countries and varying levels of digital maturity among institutions. For instance, the limited adoption of SaaS technology in some markets affects readiness for deploying GenAI systems.

To address these hurdles, Chen recommended that banks adopt a gradual approach rather than attempting large-scale implementations immediately. He suggested collaborating with technology partners to stay updated on developments and best practices; investing in education about GenAI’s potential; designing new operating models where human expertise complements AI ("Human in the loop"); and building robust data governance frameworks to ensure reliability and fairness in AI-driven decisions.

"Adopting GenAI-powered solutions will be one of the essential drivers for banks to remain competitive in this dynamic landscape and will help them meet the evolving needs of current and future customers," Chen concluded.

By focusing on vendor collaboration, governance protocols, stakeholder education, and operational review, APAC banks could position themselves for successful integration of generative AI into their core activities—enhancing competitiveness while delivering improved customer experiences.