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: Fintech company Ocrolus co-authors study on how automation can reduce bias in lending


As regulators and banks ponder ways to correct unfair lending practices to people of color, fintech startup Ocrolus Inc. has taken part in a study that shows that automating more of the loan application process boosts diversity in loans.

With non-white borrowers continuing to receive a lower percentage of capital for homes and businesses, Ocrolus executive David Snitkof has co-authored a study by New York University Professor Sabrina Howell on automation in small business lending.

The study, Automation in Small Business Lending Can Reduce Racial Disparities: Evidence from the Paycheck Protection Program, is expected to be re-published in coming weeks in the Journal of Finance, a spokesperson from Ocrolus told MarketWatch.

For the study, Ocrolus contributed data it compiled while handling document automation for the COVID-19 pandemic under the Paycheck Protection Program (PPP).

Black-owned companies disproportionately obtained PPP loans from fintech lenders, not traditional banks, particularly in areas with high racial animus, according to the NYU study.

The data also shows that after traditional banks automate their loan application processes, their PPP lending to black- owned businesses grows.

Also Read: FICO scores leave out ‘people on the margins,’ Upstart’s CEO says. Can AI make lending more inclusive — without creating bias of its own?

Snitkof, who is head of analytics for Ocrolus, said that document automation and analysis technology that the company uses for customers such as PayPal
Brex, SoFi,

and Plaid helps reduce human bias in lending.

“The greatest black box of all is the human mind,” Snitkof said. “You never know how people make decisions. If you can take those aspects and have them audited and automated, you take a lot of the potential bias out of the system.”

Also Read: Can an effort to revamp anti-redlining lending laws survive the swamp?

Also Read: Bank of America draws mixed reviews for zero-down-payment mortgages aimed at boosting Black and Hispanic home ownership

Nowadays, Ocrolus is processing more than 200,000 small business loan applications per month. It launched in the mortgage space in 2020 and it now counts mortgage originators as customers as it plans more growth there.

Ocrolus raised $80 million in a Series C funding round at a company valuation of $500 million in Sept., 2021, led by Fin VC and with participation by several other firms including Thomvest Ventures, Mubadala Capital, Oak HC/FT, FinTech Collective, and QED Investors.

The company expects to generate $40 million in annual recurring revenue by the end of 2022, up from $1 million in annual recurring revenue in 2018.

Ocrolus counts nine out of the top ten mortgage originator as customers including Cross Country Mortgage LLC.

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