A former Citi executive vice president recently launched a product aimed at helping banks root out bias by analyzing customer complaints.
Marcia Tal, a 20-year banking veteran who built Citi's Global Decision Management function in more than 30 countries, said her Bias Index uses an artificial intelligence (AI) predictive model to identify prejudice in financial institutions.
The Bias Index is a new feature of PositivityTech, a platform Tal launched last year, which helps companies leverage data in customer complaints.
The product has been in development for some time and is launching amid a "perfect storm," Tal said in an interview with Banking Dive, referring to the coronavirus pandemic and the May 25 police killing of George Floyd.
"People are in a mind shift moment and institutions really need to be paying attention to them," said Tal, who runs her own consulting firm, Tal Solutions LLC. "People around the world are raising their voices. They're complaining, and that complaint can be as we're experiencing it, through protests. They're also complaining in written form, using their voices to basically highlight the injustices that have been with us for such a long time."
Tal said the Bias Index uses complaint data sent to the Consumer Financial Protection Bureau (CFPB) to identify patterns of bias.
"We are accessing, through open source capabilities, the information that the CFPB makes public," she said.
The CFPB doesn't make public all of the complaints it receives — customers must first give permission — but Tal said the bureau's public complaints make up a "sizable portion."
"We built all these capabilities using this information because that was available and it works," she said. "And it oftentimes is shocking to institutions because they’re not always seeing the power of the data of the CFPB. They're not looking at this data as really that significant because it's relatively small compared to large institutions’ internal data. ... When you see there is four times the probability of bias in one set of products versus others, that's something that you can't ignore."
The recent social unrest spurred by Floyd’s death has led to an increase in interest for her product, Tal said.
"The interest is not only in the identification of the bias, but the ability to pinpoint particular products, policies and practices that have a high correlation to the bias," she said. "This is about all kinds of bias, whether it's age, gender, race, religion or military status."
Mortgage products and vehicle loans or leases have the highest levels of bias among products in consumer banking, Tal said.
"Our hypothesis behind that is, if you think about the sales process of mortgages and automobile loans or leases, there is a lot of face-to-face interaction," she said. "And face-to-face interaction can be a driver."
An October study by online lending marketplace LendingTree found Black borrowers have the highest mortgage denial rates at 17.4%, while Non-Hispanic Whites have the lowest at 7.9%.
"Race and ethnicity should not be a factor in determining lending decisions," Samuel Deane, a financial planner with Deane Financial Partners, told Business Insider. "Yet, even with similar creditworthiness, whether face-to-face or online, the Black community is unfairly being charged higher interest rates and refinance costs — a practice that is deeply rooted in systematic racism."
A Thursday report by the The New York Times also illustrates how Black customers have been turned away or accused of fraud for simply trying to cash a check or withdraw money.
Tal’s Bias Index is geared toward financial institutions — the majority of her team has a background in financial services — but she said the technology could be applied to any industry.
"In financial services, we created our own proprietary lexicon to represent the language that customers use when they complain about financial service products," she said. "We would need to tweak that in order to be able to get the same level of accuracy [in another industry]."
Banks address inequality
Floyd's killing and the subsequent protests led many banks to institute policies aimed at addressing social inequality.
U.S. Bank pledged June 5 to boost loans to Black-owned businesses by $100 million and establish a $15 million fund to award community grants to organizations dedicated to addressing economic and racial inequality.
Bank of America also said it would donate $1 billion over four years to help communities address economic and racial inequality exacerbated by the coronavirus pandemic.
JPMorgan Chase CEO Jamie Dimon said last month that the pandemic should be a "wake-up call," and Wells Fargo CEO Charlie Scharf said Tuesday the bank's progress on diverse hiring will directly affect executive compensation. The bank also plans to hire a new diversity and inclusion executive that will report to Scharf.
As banks introduce diversity initiatives, Tal said institutions would be wise to consider creating strategic partnerships between diversity and analytics teams.
"The banks are trying to address this by expanding their diversity and inclusion programs, and those are important because they're bringing in the human element, whether it be cultural, training or behavioral," she said. "But think about the power of linking together the chief diversity officer with the chief analytics officer. I'm not sure that that's happening right now, and I think that is an untapped opportunity."