With OpenAI’s ChatGPT having brought artificial intelligence to the public consciousness, those who live and breathe securitization — a data-intense and complex industry — are grappling with what it means.
Most of the chatter focuses on the startups looking to capitalise on the hype, promising to save time on labour-intensive tasks traditionally carried out by analysts.
But securitization has, since its inception, been an industry that requires specialists in gathering and delivering data, and one that that lends itself to rich analysis commentary. It would be easy to see the advance of AI revolution as a threat to the firms that have traditionally carried out these tasks.
It doesn’t have to be the case — as long as these players see the value of what they have.
In securitization, news archives, old transaction documentation and ratings reports, to name just a few examples, are to the AI revolution what coal fields were to the industrial revolution. This where AI will scrape and trawl for data.
These are not verbs that imply either fair methods of obtaining the data or that the data is high quality. And the approach of leaving algorithms to sort the wheat from the chaff has produced remarkable results.
But for an industry that depends on accuracy, honing those models on high quality data is key and there are firms who have built reputations on providing that kind of data over decades. These are the firms best-placed to ensure AI enhances the securitization market and — if they are smart enough — it should be a highly fruitful endeavour.
Moody’s this week launched a new, in-house, AI-powered ‘Research Assistant’ that will be covering structured finance by the first quarter of 2024.
In doing so, it has shown the way for established securitization players, who must first protect their data from the scrapers and trawlers — and, second, deliver it in a format that is helpful and usable to the clients with whom they have agreed to share it.
Securitization’s AI revolution should not be televised; it must happen within those firms that have the most intimate knowledge of the industry.