Credit Crisis

When the COVID-19 pandemic hit earlier this year, the widespread economic fallout and impending job loss were staggering. Almost overnight, millions of Americans faced  income loss that made it difficult or impossible to pay bills, credit cards and loan payments. As the crisis continues, consumer credit scores are likely to drop on a mass scale, making it difficult for millions to secure loans and credit needed to make big ticket purchases (such as homes, cars and appliances) that will ultimately help rebuild economic growth.

To better understand the financial impact of COVID-19, Finicity conducted a survey of 2,000 US consumers in June 2020. The survey aimed to help us understand the scale of their financial loss, how it’s impacting their ability to make critical payments and their overall credit health, and whether they believe changes in the credit review process could help. Our new report, Combating the Emerging COVID Credit Crisis, revealed a growing need for an open banking model within the existing lending process, which can help create greater financial inclusion for economic recovery. 

Job loss and low credit

At the onset of the pandemic in early March, businesses were forced to close their doors and millions found themselves without work. Unemployment hit an historic 14.7%, the highest since the Great Depression. Our survey found over half (55%) of respondents had either lost their job or had their income impacted due to the pandemic, leaving many behind on bills with no choice but to bridge the gap with credit.  

The loss of work and income led to strained finances and hindered American’s ability to pay critical bills, and as a result, 61% of respondents are concerned their credit will be negatively impacted. Nearly all (95%) those impacted said they are concerned about their ability to rebuild their credit or take out a new loan. 

The most vulnerable hit the hardest

Respondents with annual incomes below $50,000 are being hit the hardest financially. This group sustained more significant job and income losses during the pandemic with lower credit representation than those in higher income brackets — 62% of those with incomes below $50,000 lost their jobs or had their income impacted during the pandemic, compared to 40% of those with a household income over $100,000. 

Compared to wealthier respondents, those making below $50,000 are having increased trouble staying on top of their bills and loan payments. Seventy-three percent of those with a household income under $50,000 said the crisis made it difficult for them to keep up with bills and payments, an abrupt contrast to the 54% of those with a household income over $100,000. 

Additionally, lower-income respondents were more concerned about how the pandemic would impact their credit than their wealthier counterparts. Credit anxiety is staggering in this demographic, with 1 in 4 hesitating to rely on credit during the financial hardship, or not attempting to use it at all, as many assume they will not qualify for loans or credit. Over two-thirds (68%) of respondents with incomes below $50,000 said they’re concerned this financial situation will have a negative impact on their credit moving forward. 

Inclusive lending

The ongoing, large-scale job and income loss leaves many vulnerable in the current lending process, and the COVID pandemic is now accelerating the need for a more complete credit review process, something consumers are now also asking for. Nearly two-thirds of respondents (64%) do not believe the current credit rating system gives lenders a complete picture of a person’s creditworthiness.

An overwhelming 82% believe a new, more comprehensive system needs to be established — one that allows more ways for borrowers to prove their creditworthiness. Many cited an expansive list of financial data they believe best represents them and their creditworthiness. Data such as current income, utility,  cellular phone, and rent payment history were pinpointed as possible considerations.

Open banking joins traditional crediting

The frustrations the respondents shared are not new, but the COVID-19 pandemic has brought them to the forefront, revealing how urgent changes need to be made to legacy lending processes. To repair the economy, consumer spending must increase, and large purchases such as cars, homes and appliances will drive the recovery. Damaged credit may continue to deter these purchases. 

With many Americans lacking traditional credit data, lenders are in need of a new way to better understand a potential borrower’s credibility. Similarly, borrowers need better access to their financial data to better understand their creditworthiness. 

The current credit process also leaves lower income borrowers at a steep disadvantage, and a change in this process could lead to better representation and greater equality in the lending market. The solution to the lending market inequality and growing frustration over the existing lending process is the emerging open banking model. This model, in conjunction with traditional credit scores, allows for a more complete credit picture of potential borrowers, giving borrowers more agency over their financial data — paving a way for better financial literacy among individuals and a better economy for all. To download the full report, click here.

One of the most notable trends in consumer empowerment is their ability to access and use their financial data. Like large enterprises, consumers can benefit from their ‘big data’ to improve their lives and achieve their financial goals. Key to this is enabling simple and secure access to and permissioned use of their data.

Today, Finicity continued its market leadership in providing such access by signing a data sharing agreement with TD Bank. As an open banking vanguard, Finicity is bringing to market direct data access connections with many of the largest financial institutions, and in launching these open API connections it is building a consumer-centric, high-quality data access platform.

TD Bank joins a growing list of major financial institutions Finicity is working with to further empower consumers. Just a few of these agreements include:

Chase
Wells Fargo
Capital One

USAA
Fidelity
US Bank

 

Finicity’s open banking platform offers direct connectivity to thousands of North American banks through next-generation API connections to ensure seamless access to consumer-permissioned data. Open banking is providing consumers with the access, control, transparency and security of their financial data needed to power a wide variety of financial experiences, from budgeting to payments to lending and more. Finicity’s open banking platform not only enables fintech innovation but it is meaningfully transforming consumer financial literacy, management and inclusion. 

As new technologies, use cases and data science applications continue to evolve, open APIs will be the standard for banks, fintechs and consumers to get the data they need. Finicity anticipated this need in the industry and helped create the Financial Data Exchange (FDX), which TD Bank is also a founding member. The result is the industry coming together to standardize data sharing with the FDX API. 

We appreciate the partnership with TD Bank and our common vision of enabling experiences that empower individuals, families and businesses to better financial outcomes.

Read more about our agreement here.

Consumer Permissioned Data

Before 2020, companies pushed towards using more and better data in an attempt to be positioned at the apex of innovation. Once COVID-19 hit, putting consumer-permissioned data to use was no longer optional, as traditionally-run organizations were forced to adapt to remote-working conditions overnight and throwing people at a problem couldn’t be done effectively.

As we might assume, many expect the pandemic to “accelerate the pace of their digital transformation.” But, putting data to use at scale throughout different processes will give businesses more than just increased “immunity” to future pandemics. Having real-time data your company can trust enables agility in any business landscape, regardless of the catalyst driving the need for change. 

Here are four important reasons why your business should look to consumer-permissioned data to thrive in today’s COVID-19 world and beyond: 

1. Real-time data mitigates risk to your business.

When transacting with your customers, verifying income and employment information is important. With recent economic uncertainty, combining traditional financial measures of health that look backwards, like credit scores, with real-time transaction data provides an even better view into current financial health. Consumer-permissioned data provides a real-time view into customers’ bank accounts so you’re able to decipher today’s income streams and overall financial wellness. 

Specifically, the amount of risk assessment that can be accomplished through bank transaction data is nothing short of astounding. Organizations can pull balances; create asset reports; identify income streams, payment streams, or other recurring transactions; identify cash flow history and trends; or view KYC account details. In short, transaction data can be used to create a detailed web of credit risk and decisioning insights. This real-time data is essential for mitigating risk as you offer a new service or loan, as well as for ongoing monitoring for financial distress indicators. 

2. Data allows for easier adaptation to demand changes.

Economic uncertainty creates large increases in demand for the financial services industry. Historically, digital lenders, organizations that have introduced automated data flows into their processes, have been able to handle changes in demand volume 50 percent better than non-digital lenders. This means they can process more loans without having increased origination time. Even when times do increase, they do so more slowly than their non-digital counterparts. 

Is your business equipped to service large fluctuations in demand? Call on experts to test your system against the main constraints seen during demand spikes: scalability, flexibility, agility, data sourcing, and meeting customer needs. Defining the breaking points in your process can identify what needs to be digitized, automated, or reimagined with new data, so you’re prepared for future surges in demand.

3. Customer expectations have changed. 

Some businesses may wonder if data is truly the solution, thinking that traditional, in-person transactions will resume to pre-pandemic levels as the virus subsides. This may be a faulty assumption, as customers are becoming increasingly digitally inclined. In fact, in 2019, finance apps saw a registration increase of 71 percent. From there, the beginning of 2020 showed a 35–85 percent increase in financial app-use, largely attributed to COVID-19 and its associated stay-at-home measures. 

Regardless of the driver, it seems customers are expecting a digital experience made possible through them permissioning their data. Financial institutions that can offer the most simple or convenient solutions may absorb the customers of services who cannot. 

4. Now is the time to employ data 

Because of the tremendous business opportunities of data and digitization, many financial institutions are ramping up their capabilities through partnerships with FinTech companies. What does this mean for the industry? Businesses are improving performance by gathering better data, operating under better insights, and making better decisions (with much less risk). 

How is this accomplished? FinTechs like Finicity have already created direct data access connections with major financial institutions. These connections provide required data for third parties to connect to their customer’s bank accounts while also increasing consumers’ control over data sharing. These connections also increase security for all stakeholders. 

These financial institutions lean on the expertise of FinTechs to quickly roll out their offerings while pushing the industry baseline to new heights. 

The year 2020 has brought unprecedented changes to the world, with major forces on the economy. These pressures are driving innovation within the financial services sector, specifically in the area of data usage and digitization. As a result, businesses will likely realize the outcomes of better risk mitigation, quick adaptation to demand changes, more alignment with new customer expectations, and improved data-led performance through partnerships with FinTech companies. Whether it’s a worldwide economic downturn or simply a pivot toward a new business initiative, digitization is key to successfully leading your organization through these—and future—turbulent times.

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Goodbye to My Friend Lila Fakhraie

A career path is marked by many milestones. Great successes, sometimes failures. However, as I look back on my path, the most important aspect is not the milestones, but the people – friends – I’ve been blessed to walk it with. 

Today is a day of sadness and gratitude, as I’ve lost one of those friends in Lila Fakhraie. Lila and I first crossed paths as Finicity looked to engage with her team at Wells Fargo to discuss our solutions and our data connection with them. However, our relationship soon evolved to one where we shared a common vision of bringing the industry together to better address how consumers could be empowered to use their data. Working together, Lila and I helped to found the Financial Data Exchange (FDX), and have spent more than two years as co-chairs of the organization.

While establishing FDX is a great milestone, my partnership and friendship with Lila has made all the difference in the experience. Her insights and commitment kept us moving forward, but it was her quick smile and warm laugh that helped bind us together.

She will be missed. Yet, I will always have positive feelings and a deep sense of gratitude for having the opportunity to know and work with Lila. 

On behalf of the entire Finicity team we express our deepest condolences to the Fakhraie family.

My thoughts and prayers are with her husband Saied Nesbat and her daughters Hannah and Yasmin.

Why Digitize Now?

Before 2020, the mortgage industry pushed towards digitization to be on the cutting edge of innovation. Once COVID-19 hit, digitization was no longer optional, as traditionally-run mortgage companies were forced to adapt to remote-working conditions overnight.

Amid today’s challenges, agility is the key to growth. In the mortgage industry, that agility can be achieved through a digitization strategy. We’ve answered some of the most pressing questions about digitization and how it can help you thrive:

Is it too late to go digital? 

Social distancing has made the switch to digital more urgent in the mind of the consumers. However, it’s not too late to start your organization’s digital conversion. 

Creating a positive digital customer experience requires a unified vision and implementation plan that is aligned across all levels of the company. Remember, your consumers’ opinion of your product/service is heavily dependent on their digital experience with your company.

What’s the difference between doing digital and being digital? 

Successful digitization requires a holistic digital strategy. For example, being digital can likely allow you to combine multiple processes across the company into one smooth, time-saving flow. 

Upper management is key to viewing the company as one, setting the vision, and creating a culture that is digital. By maintaining a holistic digital view, organizations can avoid cobbling together disparate digital solutions that may not ultimately improve the overall business.

How has digital mortgage helped organizations during these times?

Amid low-interest rates and high demand, digital lenders deliver a positive experience to their customers by being scalable and flexible in their digital offerings. In fact, digital mortgage lenders handle elasticity 50 percent better than traditional lenders, which has translated into 27 percent more originations for lenders in February and March 2020.

How does the size of my organization change my digitization strategy? 

Regardless of the size of your organization, a digitization strategy can boost your ROI. For small businesses, digital solutions can allow them to compete with larger organizations. 

Digitization in larger organizations can improve efficiencies and customer satisfaction. This allows the org to tackle even more opportunities overall. In today’s digital world, expansion into new markets is driven more by awareness and having the right product/experience than it is by building physical branches. 

Do digital verification reports make more or less sense in a turbulent environment?

Low conversion rates within your borrower funnel may be a reflection of inefficient existing processes. Review your process for ways to improve the viability of verification reports during origination. For example, it’s possible to improve pull-through by moving consumer-permissioned data earlier in the funnel. This can be done via a prequalification report or full verification report, completion of which reflects a higher degree of borrower commitment than self-reported data might.

If we have low adoption of digital solutions, how can we reverse that trend?

Usage of digital solutions starts with executive sponsorship. The C-suite must set the vision of digitization and align incentives appropriately. 

As an expert in this space, Finicity is here to help drive your company to a more efficient digital future. We can provide materials for your team to reference as well as provide in-person coaching to speed adoption.

How can we be prepared for the increased scrutiny in underwriting or in the secondary financial markets? 

Globally, consumer assets, income, and employment have been greatly impacted. This uncertainty will lead to increased scrutiny of loans. Therefore, lenders need access to digital solutions to get a clear picture of a person’s qualifications for a loan. Having real-time, bank-validated data is vital to allowing organizations to make informed decisions.

The pandemic is driving increased consumer demand for digital solutions across the mortgage industry. Going forward, those organizations that view these challenges as an opportunity to digitally transform their business will be best positioned to thrive.

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As the co-founders of Finicity we are thrilled to share that Finicity will become a part of Mastercard!

When we started Finicity over a decade ago, we set out to help individuals and families better manage their finances by providing a technology-driven budgeting platform and the data needed to make smarter financial decisions. Finicity was truly one of Fintech’s pioneers.

We have since grown to become a trusted data access and insights platform for financial services innovation. We empower consumers to access, control and permission their financial data for use within other fintech and financial services products. Our clients are some of the most forward-thinking organizations in the world, as they transform the way consumers and businesses experience money—everything from budgeting, saving and borrowing to transacting, investing and lending.

And while this is a major mile marker for Finicity, it is only one on our continuing journey of consumer empowerment. We believe what we do will change the world for the better. We see tremendous opportunity to improve financial literacy, expand financial inclusion, reinvent money movement, transform digital underwriting, pioneer digital trust, revolutionize credit scoring and generally accelerate financial technology.

The next phase of this growth will happen as part of Mastercard. For more than 50 years, Mastercard has fostered a culture of innovation and has embraced technology advancements.

Mastercard invested early in open banking and launched a set of solutions in Europe last year. Today, these leading services are live in a dozen countries. With the addition of Finicity, Mastercard expects to not only advance its open banking strategy but enhance how it supports today’s digital economy. This strategic approach demonstrates how Mastercard is an excellent fit.

We are confident Mastercard is the right partner at the right time to enhance the trajectory of Finicity in accomplishing our mission. Combining our efforts with Mastercard’s resources, partnerships and expertise, will allow us to expedite our progress and expand our reach.

Over the years, Finicity has connected millions of consumer accounts, helping them permission the use of their data to their benefit. Across personal financial management, lending, credit scoring, credit decisioning, payment initiation and more, Finicity has fueled the promise of fintech, which is to enhance a consumer’s or organization’s ability to accomplish their financial goals.

To our clients and partners, we are very aware that where Finicity is today wouldn’t have happened without your support and collaboration. There hasn’t been anything more fulfilling in business than working with each of you to launch something new that meaningfully changes consumer experiences.

A special thank you to Financial Technology Partners (FT Partners) and Cooley LLP for their advice and support through this process.

We look forward to our partnership with Mastercard and believe it will lead to greater possibilities for our clients and partners, both those we work with today and those we’ll work with in the future.

We’re excited to embark on this next leg of our journey with Mastercard and furthering our goal of changing the world.

Steve Smith and Nick Thomas

Link to press release

Getting access to the best data for your unique use-case starts with having the best developer experience. Starting to code to endpoints, testing data and making sure you’re getting the best data for your needs is key to a developer experience that makes using Finicity’s consumer-permissioned data simple, provides the needed data after a quick integration and can help you build your customers’ data into your product.

Finicity’s current developer experience is designed with industry best practices to ensure your innovations can connect the most consumers to their financial institutions in the US and Canada.

 

Get Started
Our get started experience walks you through how to set up a connection for the first time.

It makes it easier to jump right into Finicity’s APIs, understand how our APIs work, how they interface with Connect and it’s waiting for you once you sign up and get started.

 

API Reference
When you’re ready to get into the details, we’ve provided everything you’d need in our API Reference section. This includes API specs, code examples, response types, models, the option for different code examples, a “Try It Out” feature, and customized code snippets that you can download.

Everything in One Place
For all of the documentation and details provided, we’ve made it easier to find exactly what you’re looking for, kept it easy on the eyes and made it responsive so it matches what you’re looking for and how you develop.
Documents are now more scannable, skimmable and consumable from the dropdown menu to the last section of one of our guides. If you’re also looking to manage your account with Finicity usage and billing are still included all in the same place so you’re never too far away from the key details you need.

 

Start Developing
You can integrate to Finicity APIs today. If you haven’t previously, you can sign up for our developer portal or you can check out our documentation on its own. 

 

Trust over IP Foundation

Digital innovations are happening at lightning speed. The sheer number of things we can do online—simply by sharing some of our data—is truly astounding.  And it’s growing daily.

But with convenience comes concern. Consumers are beginning to worry about how much data they’re sharing. What companies are doing with it. And who should really own that information. With breaches at historic highs and increasing since the COVID-19 pandemic, it’s no wonder consumer trust is beginning to wane.

That’s why Finicity has joined with 20+ governments, nonprofits, and businesses across finance, health care, enterprise software and other industries to create the Trust over IP (ToIP) Foundation and advance digital trust standards. 

This cross-industry coalition has partnered with the Linux Foundation to create global industry standards for both ecosystem governance and technical standards for the exchange of verifiable credentials between any two parties on the Internet. The adoption of TOIP will dramatically enhance privacy for consumers and businesses— while infusing data with trusted markers that prove it comes from a credible source. It will also allow consumers to connect, interact, and innovate at a speed and scale not possible today. 

The mission of the ToIP aligns with our own guiding core principles of control, access, transparency, traceability, and security, which is why we felt compelled to become a founding member.

 

A roadmap for empowerment and innovation

Data breaches are at an all-time high. Consumer confidence is at an all-time low. And losses due to identity theft are growing every day. As hard as this situation is, we believe this triumvirate of pain will drive the adoption of a new data ecosystem.

And that’s exactly what the ToIP Foundation has mapped out. With a global standard for trustworthy exchange of data, plus collaboration between all stakeholders—from industry leaders to policy makers to consumer groups—we can create an ecosystem that significantly advances digital trust and keeps innovation on track.  

It starts by giving consumers control of their data. This will allow them to decide who gets what information—rather than sharing more than is necessary and introducing unnecessary risk. That, in turn, will allow more space for companies to create a wide variety of compelling solutions that further empowers consumers and that they can embrace with confidence.

The ToIP Foundation will use digital identity models that leverage interoperable digital wallets and credentials, along with the new W3C Verifiable Credentials standard, to address these challenges and enable consumers, businesses, and governments to better manage risk, improve digital trust and protect all forms of identity online. 

Think of the possibilities. Loans that currently take several days to underwrite could be done in minutes—leading to faster closings and lower costs. Other types of transactions can happen faster, too. Imagine proving your age without sharing your drivers license or proving your nationality without sharing your passport. TOIP will dramatically improve data privacy by reducing or eliminating the need to share data. Imagine being able to answer yes to a question “are you over 18?” without ever sharing your birthdate.

 

ToIP Foundation members

The ToIP Foundation is being developed with global, pan-industry support from leading organizations with sector-specific expertise.  Please visit https://trustoverip.org/members/ to view an up-to-date list of both steering and contributing members.   

As we work together to solve the trust dilemma, we’ll see a rapid acceleration of innovations that will change the way we do business, share consumer information, connect with others, and engage in entertainment. All with the utmost confidence in the security of our data.

In 2019, 64 percent of global consumers used a fintech service. Then COVID-19 hit.

Due to social distancing measures, most face-to-face transactions have dropped off. What does this mean for the fintech industry? Here are four indicators that fintech will not only survive this crisis but will also see accelerated growth as well:

 #1 – A sudden acceleration in all things digital has given fintech even more permission to play.

COVID-19 has drastically and rapidly changed how we interact with each other. This, coupled with the associated economic slowdown, has created the opportunity for fintechs to rise to the financial challenges we all face.

Never has the world been more open to the innovative solutions offered by fintech. This was powerfully demonstrated in early April when PayPal became the first non-bank to be approved to administer small business loans via the US Small Business Administration’s Paycheck Protection Program.

 #2 – Fintech apps have seen increased user engagement.

According to Forbes, the US saw “35% growth in time spent in finance apps overall from the week of December 29 to [March 15, 2020].” In addition, “Japan and South Korea have also seen phenomenal growth in time spent [in] finance apps at 85% for the same time period.” By reviewing examples of 2020 usage and industry changes, we see that fintech is well-poised to become even more essential to daily life.

 #3 – Increased need for verification.

With the US Federal Reserve cutting interest rates to almost zero, homeowners are looking to refinance. However, growing unemployment rates have increased risk for lenders. Mortgage companies need real-time insights through consumer-permissioned data. They also need to provide their customers with an engaging digital experience, which is quickly becoming the new normal. In response, they may turn to data access providers like Finicity for digital employment, income, and asset verification.

 #4 – Fintech grows in uncertain times.

The rapid rise of modern fintech traces its roots to the 2008 global recession. Consumers lost trust in the financial services industry, and new challengers arose to address marketplace concerns. Born out of adversity, “fintech is an industry that thrives when there are specific problems to solve.”

While the full effects of COVID-19 remain to be seen, these four indicators suggest that this economic situation will continue to drive significant interest in innovative financial services. Out of necessity, customers are seriously exploring digital tools available via traditional financial firms, as well as new entrants. This exploration will quickly become a habit, leading to permanent adoption of digital financial experiences. Increased customer interest means the services that solve the financial problems of today and tomorrow are well-poised to enjoy success in the post-socially distanced world.

Clearly the spread of the novel coronavirus (COVID-19) is top of mind for everyone. We are sure that you are taking time to think through and plan on how it could impact your employees and business. At Finicity, we’re doing the same. We wanted to share our plans and readiness activities in response to the coronavirus. We’ll continue to update you here if there is any new information.

At the moment, COVID-19 has been declared a pandemic. We have seen industry events canceled and more business being conducted via teleconferencing in an effort to reduce the spread. For the most current information regarding COVID-19 and its impact, please check out the World Health Organization and the Centers for Disease Control and Prevention.

Additionally, the Department of Health & Human Services and the CDC has a helpful guide for providing updates on the coronavirus while also providing tips on how to effectively run your business and protect your employees and customers during this time.

Finicity’s Approach

Finicity is committed to protecting the health of our team members and customers. We are also dedicated to providing seamless and trustworthy API and decisioning services to each and every one of our customers. We know that you and your customers rely on us staying up and running—and we wanted to share what we’re doing to ensure we’re operating without a hiccup.

Restricting travel for our team

Finicity has significantly limited business travel both outbound and inbound (if you are planning on meeting with us, please connect with your Finicity lead to understand how these processes may impact your meeting). We have also encouraged our team members to minimize personal travel and implemented disclosure and self-quarantine policies.

Work from home program

We’ve started a work-from-home policy for employees, which we may expand in the coming days. We’ve asked that certain individuals work from home—specifically, people who are likely to get sick more easily, or for whom it’d be particularly problematic to get sick.

Suspension of visitors to Finicity offices

We have implemented a policy of restricting visitors and requiring screenings for those few that we will be hosting. We’re moving in-person meetings and candidate interviews to video-conference as much as possible.

Continued technological best practices

Finicity’s infrastructure is built on the world’s largest and most advanced IaaS platform — Amazon Web Services (see more on AWS’s pandemic response procedures here). Our systems are administered by experienced and fully empowered operators and are monitored around the clock by best-in-class software monitoring tools to notify our operations team of any anomalous behavior. Our internal incident report and response process is well documented and followed by each team at Finicity. Our state-of-the-art technology stack and operations practices have prepared us to provide you continuity of services for situations like this and more.

While we don’t know what the full implications will be of the coronavirus, we are proactively taking precautionary steps. We want to err on the side of caution and ensure there is no impact to your business with us. We will continue to monitor the situation and provide updates. Don’t hesitate to contact your Finicity team with any questions or concerns.