Zest AI Releases New Race Prediction Model To Reduce Systemic Bias In Lending

Technology addresses inaccuracies in race prediction affecting tens of millions of Americans

Zest AI

LOS ANGELES, March 1, 2022 /PRNewswire/ -- Zest AI, a leader in software for AI-driven lending, today announced the launch of Zest Race Predictor (ZRP). This open-source machine-learning algorithm estimates the race/ethnicity of an individual using only their full name and home address as inputs.

ZRP can be used to analyze racial equity and outcomes in critical spheres such as health care, financial services, criminal justice, or anywhere there's a need to attribute the race or ethnicity of a population dataset when race/ethnicity data is missing. The financial services industry, for example, has struggled for years to achieve more equitable outcomes amid charges of discrimination in lending practices. A better yardstick can help reverse this legacy of bias.

ZRP improves upon the most widely used racial and ethnic proxying method, Bayesian Improved Surname Geocoding (BISG), developed by RAND Corporation in 2009. In multiple tests against BISG, ZRP was able to identify African-Americans correctly 25% more often, identify 35% fewer African-Americans as non-African American, and 60% fewer Whites as non-White.

"Zest AI began developing ZRP in 2020 to improve the accuracy of our clients' fair lending analyses by using more data and better math," says Mike de Vere, CEO of Zest AI. "We believe ZRP can significantly improve our understanding of the disparate impact and disparate treatment of protected-status borrowers."

"I've employed the ZRP output myself and found that it provided results consistent with our predictions, in the context of predicting the race of PPP borrower firm owners," says Sabrina Howell, Assistant Professor of Finance at NYU Stern. "Getting race estimates right is key to facilitating fair lending practices in America, and by making their tool open-source and freely available, Zest's application is an important step towards that goal."

"We have known since our 2014 study that BISG leaves much room for improvement," says Dr. Marsha J. Courchane, Vice President and Financial Economics Practice Leader, Charles River Associates. "We are thrilled Zest took the initiative to apply modern data science methods to develop a better race estimator, and we are looking forward to further validating this work."

More accurate race prediction will help the entire lending ecosystem:

  • Lenders will be better able to identify unfair outcomes to improve models.

  • Regulators will have a better tool to enforce fair lending rules that drive equity in access to credit products that could help people of color earn better credit scores.

  • Borrowers will benefit by knowing their race and ethnicity are more accurately reflected alongside their credit history.

To learn more about the Zest Race Predictor, please visit https://www.zest.ai/solutions/zest-race-predictor or download the code at ZRP's Github page here: https://github.com/zestai/zrp.

About Zest AI

Zest AI software helps lenders make better decisions and better loans—increasing revenue, reducing risk, and automating compliance. Since 2009, it has made fair and transparent credit available to everyone and is now the leader in software for more inclusive underwriting. The company is headquartered in Los Angeles, California. Learn more at www.zest.ai and connect with us on Twitter at @Zest_AI or Zest AI's Insights blog.