In this episode of "The Buzz" podcast, Bank Automation News hears from Seke Ballard, founder and CEO of Beta Financial Services, a Chicago-based holding company that has applied for a bank charter with FDIC and the state of Illinois. The resulting branchless digital bank, BetaBank, will offer basic products and services such as checking and savings accounts with a focus on automating its commercial lending process. 

 

Part of the goal is to address the costs of lending due diligence, which Ballard tells BAN are roughly the same whether for a $100,000 or $1 million loan, causing banks to favor larger loans yielding higher profits while smaller businesses miss out. 

 

"Algorithms are a black box, and the vast majority of people who use them train their algorithms using data produced from biased human interactions," Ballard says. "If you're not intentional about removing those factors from your training set, really analyzing what data is creating bias, is it predicting if a loan will actually be charged off? It isn't." 

 

BetaBank is partnering with Google and global professional services network Deloitte on its AI-based lending automation, which Ballard estimates will require about 66,000 software development hours. BetaBank should both be open for business and have the automated loan process in place late in 2022 or early 2023.

 

The digital bank and AI solution represent something of a lifelong goal for Ballard, who says financially marginalized communities are sometimes left "in the shadows" of the banking system and have more trouble accessing needed business funds. They also pay higher interest rates, he notes. 

 

It's also personal. When Ballard, who is Black, was a child, his father was denied a loan by 13 banks when he was looking to expand his logging business. 

 

Ballard was approached in 2020 by Google, which he says shares a goal of fair access to capital, and Beta Financial sought Deloitte's services because of its deep market experience.   

 

"Ultimately, for me, this is about measuring people — everybody — using the same yardstick," Ballard tells BAN in this podcast. "Not everybody is going to be approved, but if you look at them on the merits of how [their business] performs, I think you'll start seeing some equalization."