FairPlay launching AI fairness index tool

FairPlay, a “fairness as a service” startup is launching an index tool in Q3 of this year that shows financial institutions how their underwriting affects consumers.

Los Angeles-based Fairplay uses AI-powered data analytics software to help FIs assess the accuracy of their automated loan decision models and provides them with metrics to help identify potential biases, Kareem Saleh, founder and chief executive at FairPlay, tells Bank Automation News in this episode of “The Buzz” podcast.

Saleh was named one of BAN’s executives to watch in 2024.

“Fundamentally, what we do is help financial institutions stress test their AI, identify blind spots in their AI and then correct those blind spots,” Saleh says. “And what we find is that something like 25% to 33% of the folks that financial institutions declined probably would have performed as well as the riskiest folks they approve.”

Since being founded in 2020, FairPlay has raised $14.5 million toward its tech, according to the online financial database Crunchbase.

Keeping data in check

But even AI-powered decisioning algorithms require careful examination of the datasets they use, Saleh says.

“The conventional wisdom is that AI stands for ‘artificial intelligence,’ but it can sometimes also stand for ‘accidentally incorrect,’” he says. “If you don't have a real clear-eyed view about this bias in the algorithms to overfit to the data, then you might miss the blind spots.”

5 questions for compliance

The Consumer Financial Protection Bureau in June 2024 approved a rule requiring FIs that use algorithmic appraisal tools to ensure compliance with nondiscrimination laws.

Multiple lenders received fines from federal regulators for unfair lending practices in the past two years, including $2.6 trillion Bank of America, $2.4 trillion Citi and $560.5 billion TD Bank.

FairPlay’s software enables FIs to answer these questions to help ensure compliance:

• Is this algorithm fair?
• If not, why not?
• Could the algorithm be fairer?
• How could being fairer economically affect our business?
• Did we double-check declined loan applications for undeserved denials?

Three of the top 10 largest banks are already using FairPlay fair lending analysis software. The names of the banks were not disclosed, but the top three banks by asset size are $4 trillion JPMorgan Chase, followed by the aforementioned Bank of America and Citi.

Its newest partner, $7.6 billion Pathward Financial, was added Feb. 18, Saleh says.

“Banks that use our software are often able to increase their approval rates by 10%, increase their take rates by 13% and increase positive outcomes by 20%,” he says.

Listen to this episode of “The Buzz” podcast as Saleh discusses how banks can leverage AI to improve loan approval rates.

Subscribe to The Buzz Podcast on iTunes or Spotify, or download the episode.