How Financial Data Analytics and Advancing Technology Drive Credit Decisioning:

A Q&A with Nick Thomas, Co-Founder Finicity (A Mastercard company), Financial Data Exchange, and Trust Over IP Foundation

Technology and financial data analytics have played a key role in changing and improving financial processes for financial institutions, small businesses, and consumers. One area in which this data-driven innovation is even improving and reimagining the credit-decisioning and lending processes, through a rapidly growing approach known as open banking.

We spoke with Nick Thomas, Co-founder and Chief Innovation Officer of Finicity, as well as the founding member of Financial Data Exchange (FDX), and the Trust Over IP Foundation to discuss this emerging credit-decisioning process and the impact it will have on consumer trust and financial empowerment.

First off, can you explain open banking, and more specifically, what it means for Finicity?

Open banking is — put simply — a platform that puts consumers in control of their financial data, transforming the way they experience money in everything from budgeting, investing, payments, to lending. It allows consumers to easily and safely permission access from their accounts to an app that they want to use. 

How does open banking impact the lending process?

Now more than ever, financial institutions have more access to information to better determine a person’s ability to repay and do it faster and easier. But at Finicity, we know that in an age where consumers are increasingly aware and concerned over the use of their data, it’s important to demonstrate that this increased use of consumer permissioned data via open banking is designed to give consumers more engagement with and visibility into what data is used, how it’s used, and by whom. The intent is to increase financial inclusion, improve financial health and provide better financial outcomes for consumers and small businesses..

That’s a good point to mention. Consumers are concerned about access to and use of their data because they've been burned before by their marketing data being used without their knowledge. So what does this mean for how their financial data is used?

Absolutely, consumers are right to want to know who has access to their data and how it will be used. At Finicity, we're approaching credit decisioning via open banking with several key questions in mind:

  1. How transparent is the process in which data is being accessed to evaluate creditworthiness?

  2. How secure is the access to that information to both the lenders and borrowers?

  3. Does that information offer a real-time, accurate and holistic view of someone’s creditworthiness?

For greater transparency, it’s essential that borrowers provide permission to access financial data and know how that information is being used to determine their ability to repay. Accessing data is done securely, and just as they can permission access, they can also turn off that access.

How do you think today’s financial data analytics and intelligence capabilities play a role in driving credit-decisioning?

Greater visibility means granting borrowers the option to share additional information. This is where financial empowerment comes into play. In a recent Finicity survey, 67% of consumers said they would be willing to share additional information, including current income information, payment history for utilities and other services, and rent history, to give lenders a more accurate view of their creditworthiness or even to secure a better interest rate. 

Accessibility for lenders has also become key. At Finicity, we’ve found that adding analytics such as cash flow and data sources like payroll allows lenders to streamline the capture and delivery of data that can sometimes require cumbersome, lengthy and often manual processes.

What are your expectations for the industry in 2021 and into the future when it comes to streamlining and improving the credit-decisioning process even further?

Consumers are calling for a better credit and lending process. Our survey showed that 90% of respondents believe the current credit review process and criteria need to change to make it easier for responsible borrowers to prove creditworthiness. We anticipate continued growth and adoption of open banking — so consumers have more control over their financial health, ultimately leading to greater financial inclusion, with more people participating in the traditional financial system.

There’s greater opportunity for analytics and more consumer-focused technology. It’s now up to those of us in the lending ecosystem to take advantage of the advances in technology to aid both borrowers and lenders in the lending process. This is a critical time for open banking and its potential to change the way people experience money.

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