Yesterday, leaders at the Federal Reserve, FDIC, OCC and CFPB announced their support for using alternative data, like transaction or cash flow data, in credit underwriting.

This statement represents several years of work in the nation’s capital by principled regulatory leaders, lawmakers, passionate consumer advocacy groups, and individual thought leaders tied together with the thoughtful rollout of products like Experian Boost, the UltraFICO Score, Fannie Mae Day 1 Certainty and Freddie Mac AIM.

These products use alternative data to meet the needs of credit underwriting in a digital world by providing data direct from consumers’ financial accounts combined with enhanced insights from that data. This level of connection and insight hasn’t been available in credit scoring or mortgage lending until now.

The agencies recognized that alternative data in underwriting will ultimately lower the cost of credit and increase access to credit. They also recognized that these two key results are coming directly from the innovation and continued automation of underwriting and the evolution of credit score modeling.

As the agencies outlined, benefits include:

  • Improved speed and accuracy of credit decisions.
  • Deeper insight when evaluating creditworthiness of consumers not currently in the mainstream credit system.
  • Enabling consumers to obtain additional products and more favorable pricing or terms based on enhanced assessments.
  • Providing credit opportunities for those who would otherwise be denied.
  • Increasing transparency and amount of control consumers have over their data.

It’s remarkable to see US regulators come together in unanimous public support of the principles we have evangelized to empower consumers through open banking principles and practices.

As we continue on this path, and as the agencies encouraged, responsible use of consumer’s data is paramount. Keeping the consumer at the heart of what we do has been Finicity’s North Star since our founding. This focus has driven the design of products and solutions that provide data to consumers for their benefit. It’s also the reason that we’ve taken extra measures to protect consumers by maintaining our status as the only data access provider who is also a registered consumer reporting agency.  

Congratulations to everyone who has supported this effort. This is just the beginning for where and how alternative data can be used to benefit consumers. 

Finicity is pleased to announce that our Verification of Assets (VOA) integration is now live in the Ellie Mae Encompass Digital Lending Platform and in Encompass Consumer Connect. Both solutions now include Finicity’s VOA reports that can be delivered to the borrower in an email flow or as part of an uninterrupted web workflow.

Our VOA report provides bank-validated insight into a borrower’s current financial assets. It’s a natural addition to the Ellie Mae suite of tools. Within Encompass or Consumer Connect, borrowers identify their chosen accounts and permission access for a review of their balance data. We rapidly generate a thorough report with detailed asset information mapping it to the 1003 application in Encompass. What has traditionally been a manual process overly burdened by paperwork can now be completed in minutes in a streamlined digital experience. 

In the Ellie Mae Encompass Digital Lending Platform digital verification helps loan officers close more loans, streamline their workflow, and save an average of $813 per loan. Encompass provides everything loan officers need all in one place, including digital verification of assets. 

On the consumer-facing side, Encompass Consumer Connect makes it easy for borrowers to complete their online mortgage application. They can chat with their loan officer, upload files, and sign documents with total convenience and security. This consumer portal gives borrowers more control than ever before. They can run their own credit reports, get their online verification of assets report, and eSign all necessary documentation. 

So what will this new integration deliver?

Superior Data Quality – Encompass and Consumer Connect users will now have access to best-in-class financial data, all permissioned by borrowers and delivered in a clear, accessible format for asset verification. 

Optimal Experience for Loan Officers – Everything loan officers need to optimize their workflows. Streamlined integration, fully automated workflow, all within the LOS they already use.

Convenient Experience for Borrowers – It doesn’t get any easier than this. Paperless, an intuitive user interface, and consumer control and access. All packaged in a completely digital experience with your brand front and center. 

Efficiency that Drives Revenue – A streamlined, automated verification that maps data directly into the 1003 application means faster closing times and more loans closed. Our VOA shortens the application process by as many as 6 days. And that means increased revenue potential. 

Loan origination isn’t just about account numbers and closing balances. Ultimately, the lending process is about providing borrowers with a great customer experience. Lending professionals have four main objectives: 

  1. Identify potential borrowers.
  2. Obtain and analyze borrower financial data.
  3. Advise borrowers about lending options and decisions.
  4. Move borrowers through the loan origination process until they have the funds they need.

Finicity’s new AssetReady report was designed to help lenders achieve each of these objectives with maximum efficiency. This digital asset verification solution uses high value data to deliver accurate, real-time verification in seconds. And this means better decision-making for lenders and borrowers alike. In the end, access to this data saves time, improves overall workflows, and makes for a better borrower experience.

Critically, the more information a lending professional has at the beginning of the loan origination process, the more they’ll be able to provide their clients with meaningful insights into their financial situation and possible lending options. And once your borrower is ready to move forward with their lending application, you can easily shift from the AssetReady report into Finicity’s Verification of Assets and Verification of Income and Employment solutions. All from one source. All with the best data. 

The Return on Investment: Digitizing the Loan Origination Process

What does this return on investment look like? A larger volume of prospective clients, reduced closing times, increased closing volumes, and improved customer retention and referrals. By using AssetReady, lenders are able to better qualify customers up front. With the efficiencies created by an entirely digital process, lenders can expect savings in both time and costs. The process is faster and requires less manpower and that drives profitability. 

This digital process also boosts borrower satisfaction. Today’s consumers expect total convenience. They want their loan application to be simple and intuitive. They require proactive service, personalized interactions, and connected experiences across multiple channels. 76% of customers say it’s easier than ever to change service providers. There is no shortage of options, so, like Goldilocks, they will just keep searching until they find the perfect fit. 84% of customers report that they crave personalized interaction. They don’t want to feel like just another invoice number.

If service providers fail to meet these demands, they will be left behind. The streamlined AssetReady process makes it easy for borrowers to submit their financial information. They can permission use of financial account data anytime, anywhere. Not to mention, it also enables lenders to engage with borrowers in meaningful and relevant ways. This all adds up to happy customers and happy customers become repeat customers who are willing to refer others down the road.  

Why the Right Data Platform Provider Matters  

Paul Parisi, President of PayPal Canada, explains that Big breakthroughs and progress can’t happen in silos. Working collaboratively with partners – within an organization as well as within your ecosystem to solve business problems – generates the kind of energy that fuels growth, innovation and creativity.” 

But this growth and innovation only happens when partners foster trust, communicate openly, and deliver their best. Because partnership is so important in business, we wanted to share our approach to partner relationships here at Finicity.

  • The Best Data: Our data is exceptionally accurate. We use it to supply our partners with an innovation platform to compete in and disrupt markets, envision new business models, and deliver exceptional experiences using consumer-permissioned financial data. Our direct data agreements with leading financial institutions mean reliable connections, enhanced informed consent for consumers, and access to the very best data. 
  • Commitment to Consumer Control: Finicity is the only registered CRA currently in the data access and insights/digital verification space. We take the consumer data privacy and security very seriously. Our standing as a registered CRA ensures transparency and borrower control of the lending process. 
  • Smart Onboarding: Our training resources, step-by-step guides, and personalized support make it simple for new partners to integrate our solutions with existing platforms. They have everything they need to successfully use and implement Finicity products. Beyond that, our customer-facing products have been carefully designed to guarantee a simple, streamlined borrower experience. 

Ready to learn more? Register for our AssetReady webinar on Thursday, Nov. 7 at 2 p.m. ET, or schedule a demo today. Here’s a product brief and a guide to reading the report to get you started. 

For players in the financial services and fintech ecosystems, data is our business. So it makes sense that data security takes center stage in everything we do. There are three central facets to data security protocols: exceptional visibility, best-in-class tech, and a deeply rooted culture of security awareness. 

 

Are your security standards, or those of the data provider you work with, up to par? 

 

When consumers permission their data to various third-party services and providers, they want to know that their data is safe. Once that trust is established, 40 percent of consumers increase their transactions, 39 percent increase spending, and 49 percent go on to tell friends and family about their positive experience with an organization. 

 

Giving consumers the ability to control what data they share and who they share it with opens up so many new opportunities for improving financial wellness. But we have to make sure security keeps up with the ever-accelerating pace of product innovation and bad actors.

 

Here are three metrics you can use to analyze your own data security, or the protocols in place at your partner aggregator.  

Exceptional Visibility

First things first. You have to recognize vulnerabilities, training deficiencies, and reconnaissance attempts against your platforms, both internally and externally. After all, you can’t protect what you don’t know about or what you can’t see. Having a complete picture of alerts, alarms, and probes against your platforms provides greater visibility into areas of possible exposure.

 

Behind the scenes, prioritization is critical to efficiency. McKinsey explains that “a strong cybersecurity strategy provides differentiated protection of the company’s most important assets.” Taking the time to conduct an asset audit will produce a clearer picture of which systems need the greatest attention from your security team. Once this hierarchy is established, it becomes easier to tailor workflows for optimal efficiency and security coverage. 

The Best Tech

What tech specs should you expect in a top-notch data security system? Multi-factor authentication, pretty standard in most security protocols these days, is crucial. Beyond that, you should expect robust third-party penetration testing. That outsider view of your security system is invaluable and can expose any gaps in coverage. Of course, encryption is critical. Not only should data be encrypted while it’s actively being used, it should be encrypted while it’s at rest. 

 

Finally, when at all possible, tokenized access is the ideal way to reduce the amount of Personally Identifiable Information data that gets shared. This is especially important when you’re dealing with financial records that can include items like social security numbers and bank account information.

Culture of Security Awareness

As important as all of those technical security processes are, they will never be enough if you don’t invest in a culture of security. What does this mean? It means employing a Defense-in-Depth approach. That looks like 24/7 monitoring and physical security, employee education and awareness, and participating in third-party audits of systems. We have found that complying both ISO27001 and Service Organization Control (SOC 2 Type 2) protocols provides an additional layer of awareness and scrutiny. We’re audited for these standards every year. 

 

Basically, everything from how employees access their office space to the details of our risk management processes is designed to enhance security. Gene Frederiksen, Chief Information Security Specialist at PSCU, explains it this way: “A culture of security is in place when action replaces rhetoric. Security is easy to talk about but not always easy to do.” In other words, if your data security plan isn’t all-encompassing, it isn’t comprehensive enough. Does your organization’s commitment to data security extend to all corners of your business and its culture? 

 

When it comes right down to it, data security impacts everyone across all ecosystems. People want to know that their personal financial data is safe. Companies want to be able to assure customers that their personal financial data is secure. And data custodians want to know they are sharing data with a highly trusted partner. That’s why it’s so important to get the details of your data security system right and to loop in independent auditors and analysts to make sure you haven’t missed anything. When it comes to data management, security is everything. 

I am saddened today at the news of the passing of Jud Bergman and his wife Mary Miller-Bergman in a tragic car accident in San Francisco. 

Jud was an early innovator in the consumer-permissioned financial data space and helped build Envestnet into what it is today serving thousands of financial advisors and millions of consumers. He was committed to a vision of delivering better intelligence to consumers to improve their lives and provide better outcomes. Jud’s passion and zest for life will be greatly missed by all who had the opportunity to associate with him and the company he founded.

At Finicity, we had the opportunity to work with Jud on industry-wide initiatives such as the Financial Data Exchange to help provide a better future for consumers and their data. We are truly sorry for the loss and our heartfelt condolences and prayers go to his family, friends and everyone at Envestnet in this time of grief.

Congresswoman Anna Eshoo once said, “Innovation is the calling card of the future.” Finicity operates with a similar eye to the future, each new data solution taking us closer to the future that we imagine. Our vision includes truly empowered consumers with full control over their personal data and common data sharing standards that facilitate creative problem solving within secure frameworks. Our work with the Financial Data Exchange (FDX) is evidence of our investment in this future. We know that the work we do today will impact the world we live in tomorrow. 

We are, therefore, pleased to have entered into a direct data agreement with U.S. Bank. Finicity and U.S. Bank share an unwavering commitment to consumers and to protecting their personal financial data. This agreement is the result of a collaborative partnership focused on designing superior consumer experiences and on setting the stage for the future of data sharing. 

This represents our continued efforts in leading the development of next-gen data access solutions and it will translate into multiple meaningful benefits for U.S. Bank customers. These benefits include increased security, reliability, and control. For U.S. Bank customers, permissioning their data will now be easier and more secure, the ultimate in customer experience. The relationship centers on an application programming interface (API) that provides rapid access to data through a secure tokenized process. Because of this tokenization, U.S. Bank customers will not have to share their credentials with anyone other than U.S. Bank.

Integration will require minimal effort for U.S. Bank customers. The direct API experience will simply redirect them to a familiar login experience from U.S. Bank. Emphasizing the importance of consumer control, each customer will ultimately have access to a permissioning portal where they can access, manage, and restrict the sharing of their financial data. Consumer education and consent are at the core of this data sharing agreement and inform each aspect of implementation.

Finicity is leading the financial data access market by entering into these data-sharing agreements (see our announcements with USAA, Wells Fargo, Fidelity, Capital One, and JPMorgan Chase). We currently maintain market coverage of approximately 95% of U.S. deposits and investments under management and, at this writing, 40% of that coverage will be based on direct API access. Our leadership in the direct data agreement space reflects our commitment to partnering with banks to provide the best data and the best experience for our shared customers.

While this agreement with U.S. Bank comes after much research, thought, and dialogue, it is not the end of the journey. Rather, it is the beginning—a gateway to new opportunities, new products, and new possibilities.

It’s no secret that the process for verifying income and employment is often plagued with frustrations. What should be simple is, instead, complicated. Here’s what usually happens. Underwriters and loan officers order an automated verification of income and employment. The chances of a successful response to that request? About 15-25%. That means about 75% of the time, lenders have to resort to manual methods: calling up employers and chasing paper. In other words, it’s a hassle from start to finish. And expectations of success are ridiculously low. 

That’s why Finicity is excited to announce our new Verification of Income and Employment (VOIE) solution. A truly digital experience, our solution delivers accurate, reliable, up-to-date information. And we successfully deliver that data at over 3 times the rate of current prevailing automated verifications. 

Our VOIE solution uses high value data making it the industry leader in real-time, relevant income and employment verification. It’s a simple 3-step process.  

1. Borrowers upload a pay stub and permission us to verify their income and employment.

2. We digitally extract a borrower’s pay statement data from their pay stub and then we cross-verify that key data with income transactions within their financial institutions. 

3. Lenders and underwriters get an easy-to-use report that tells them everything they need to know.  

Here are 5 ways this new solution makes lenders’ lives easier:

Cross-verification equals accuracy. Our patent-pending TXVerify™ technology uses two data sources – paystub data and bank account data – to verify and cross-verify income and employment data. Cross-verifying these two independent sources increases accuracy, confidence, and data quality. Everything lenders need to make the best underwriting decisions.  

3x more successful than current automated verifications. That means that 3 times more borrowers obtain a successful digital verification as compared to the largest solution currently available in the market. The result? Streamlined workflows that save lenders valuable time and money. 

High value data. This one’s simple. We deliver real-time, bank-validated data. We’re able to report income and recurring deposits, demonstrating income stream and employment status. Always current, always accurate.  

GSE support with the opportunity to receive Reps & Warranty relief. Lenders can rest easy knowing that they’re working with the best product. Our VOIE solution has been designed to meet the stringent requirements of the mortgage market and the technical requirements of the GSEs. In fact, Freddie Mac has now incorporated our VOIE solution into their AIM program

A convenient one-stop verification solution. Finicity’s suite of verification solutions is the only product in the verification market that delivers asset, income, and employment data in a single process. And because we have such a high success rate, the need for manual processes is drastically reduced. This makes it easier than ever for borrowers and lenders to adopt a truly digital verification process. With our digital solutions, stakeholders in the credit-decisioning ecosystem have the opportunity to further optimize their business, gain a competitive advantage, and open the door to new possibilities. No more phone calls, no more asking managers to confirm employment status. Just exceptional accuracy packaged in total convenience.  

Finicity’s new VOIE solution is available immediately for lenders, lending technology integrators, and resellers. Contact Finicity today to request a demo and learn how to integrate our VOIE solution into your platform. 

It’s time to expect more. More accuracy, more convenience, more success. You won’t be disappointed.

 

At Finicity, one of our catchphrases is, “better data, better decisions.” We know that greater access to personal financial data means improved quality of life. Today’s innovations using consumer data in the field of financial services, like those developed by Finicity, mean increased speed, convenience, and insights for individuals, families and organizations tomorrow. Their resources and product options will expand as banks, fintechs, and other key players compete for their business. 

However, it is critical to frame this data-driven innovation with robust security and privacy protocols that consumers can trust. Building on the work of the Financial Data Exchange, Finicity advocates for five key principles in the use of consumer-permissioned data: control, access, transparency, traceability, and security. You can read more about our stance on these critical issues in our whitepaper, “The Empowered Consumer and the Future for Financial Data.

Combating the Literacy Crisis with Consumer-Permissioned Data

Research shows that the United States is experiencing a financial literacy crisis. Although we are the largest economy in the world, we rank 14th when it comes to the proportion of adults who are financially literate. This is not a new problem. In 2008, the President’s Advisory Council on Financial Literacy stated:

“More broadly, the lack of basic skills such as how to create and maintain a budget, understand credit, or save for the future are preventing millions of Americans from taking advantage of our vibrant economic system. And tens of millions of our citizens are either unbanked or underserved, which leaves them outside the economic mainstream. Addressing these issues is critical to the future of our nation’s economy.”

One promising solution to this crisis is strengthening connections between consumers and third-party financial resources. The access to key financial resources and tools can be democratized when we give more people access to their data and to related resources. In the end, this results in greater inclusion in the financial system and greater access to financial wellness.

Take, for example, access to credit. We know that people with less access to credit are much more likely to face income volatility. With this volatility comes a dramatic uptick in reports of financial hardship. A quarter of adults who do not feel confident in their ability to get approved for a credit card report that they have experienced hardship from income volatility in the past year. On the other end of the spectrum, only 6 percent of those who are confident in their credit availability report similar hardship. 

Gaps in access to what most would consider basic financial services, like bank accounts and credit lines, exist largely in already marginalized communities of minorities and those with low incomes. Because of this, people are left living from paycheck to paycheck, vulnerable to any unexpected bills. There is a clear correlation between access to credit and feelings of security and stability. 

This is where the real potential of consumer-permissioned data lies. When we connect consumers to the numbers, figures, and reports that comprise their financial wellness, we connect them to the resources that help them save, invest, plan, and provide for themselves and those they care for. We connect them to possibilities. And with possibilities comes hope. 

Read our whitepaper to learn more about the policies and strategies that will enhance the security of consumer-permissioned data solutions and drive innovation.

If we’re serious about empowering consumers, we have to commit to putting tools and products in the hands of all consumers. It’s not enough to cater to consumers that are already in the know, who already take advantage of digital solutions to enhance their financial lives. Empowering consumers has to be about delivering simple products that make it easy for all users to understand potential risks and benefits. 

Poll Results Overview

In a poll of 1,500 consumers, we found that people that identify as financially underprivileged and who have received less formal education are more likely to:

  • Avoid loans or activities associated with credit checks. This ends up increasing their cost of credit and limiting their choices for jobs, housing, and other important life decisions.
  • Not share their data. This makes it difficult for them to improve their credit scores. It also reduces their access to financial management help like budgeting tools or investing tips.
  • Feel uninformed. These consumers report that they often feel like they don’t understand what’s going on with their finances. No one should experience this kind of uncertainty. 

Basically, it comes down to two correlated issues. 

  1. These consumers tend not to trust third party financial apps, products, or organizations.
  2. Because of this, they are not tapping into the benefits of accessing and using their personal financial data.

So, the financial services industry needs to do better. The task for financial institutions, fintech companies, and other financial service providers is to connect consumers with their data so that they understand their financial health, perceive the gaps in their financial knowledge, and have access to education and tools. This will ultimately give them more control over their money and their data. Now that’s an empowered consumer.

Linking Data Access to Consumer Trust

With today’s digital tools, it’s easier than ever for consumers to see and use their financial data. However, our research shows that among people who report a high school degree as their highest level of education, only 17 percent are taking advantage of their financial data. It’s clear that we have some work to do. 

Part of this work is connecting the dots between data access and improved decision making. According to our survey results, roughly 4 in 10 consumers who use their data (38 percent) feel they get enough out of it to make informed and beneficial financial decisions. When we strengthen the links between access to financial data and clear applicable benefits, we go a long way in increasing consumer trust and adoption.

Promising Consumer-Centric Solutions

One exciting tool to do just this is Experian Boost™. With Experian Boost, consumers can build their credit history, and improve their credit scores, by looping in things like utility bill payment histories. By expanding the usable data for credit reports, Experian Boost opens doors to people that would otherwise be limited by a thin credit file. 

The good news: It’s working. According to Experian, 75 percent of consumers with credit scores below 680 saw an increase in their credit score when they used Experian Boost. An amazing 90 percent of thin file consumers were rewarded with higher credit scores and 70 percent of sub-prime users saw an increase in their scores. 

These numbers matter. FICO® estimates that 79 million consumers have scores below 680 and another 53 million don’t have enough data to be scored. The new UltraFICO™ Score allows consumers to use information from their checking, savings, or money market accounts to augment their credit files. Imagine the possibilities when we connect these millions of people with their own financial data. 

This is what an empowered consumer looks like. Actively engaging with their personal financial data. Tapping into resources and tools. Confident about their financial future. 

Americans are currently saddled with $1.5 trillion dollars of student debt. $1.5 trillion dollars. This is no longer a personalized problem, only affecting a few people here and there. It’s a crisis. The good news? Debt relief programs, including employer-issued benefits, are cropping up. But before we can look at those, it’s important to understand the current scene and how we got here. 

The stats

Here’s the deal. Tuition and fees at public and private colleges and universities rose at about three times the rate of inflation between 2007 and 2018.

Chart showing how fees at colleges and universities rose at three times the rate of inflation between 2007 and 2018.

And when you look at current costs compared to those incurred by students in 1988, you’ll see that, taking into account inflation, these costs are about three times as high as they were 30 years ago.

Chart showing inflation-adjusted published tuition and fees between 1988 and 2019.

Even in the face of these mounting costs, students and families still see college as a good investment. They sign on the dotted line for loans that will likely end up burdening them for years and years to come because they believe higher education will change their lives for the better. 

Unfortunately, these students chasing their career dreams are often punished for seeking financial help. Seth Frotman, former student loan ombudsman at the federal Consumer Financial Protection Bureau and current executive director of the Student Borrower Protection Center, explained it this way: 

“In this country, we essentially treat student loan borrowers the same way we treat tax cheats (…) We will seize your wages. We will seize your tax refunds. We’ll even seize your Social Security benefits. We don’t allow them to have a second chance in bankruptcy all because you have a student loan. That is wrong.” 

Something’s got to change.

Proposed solutions

Some current solutions are proving to be less effective than desired. Take the Temporary Expanded Public Service Loan Forgiveness Program (TEPSLF). This program was funded by Congress in 2018 to help public servants (like teachers and police officers) access loan forgiveness resources and was afforded a budget of $700 million dollars across two years. 

However, of the nearly 40,000 applicants, as of April of 2019 only 262 people have actually received debt relief. That’s a whopping 0.006% success rate. Many blame a complicated application process and confusing requirements. Clearly, this solution is not working.  

A report issued June 14, 2019 by the U.S. Department of the Treasury included recommendations for improving the current student loan situation. The authors of the report call on colleges and universities to be more transparent about tuition, fees, and cost of living in acceptance letters. They also recommend financial literacy courses for students. While changes like this might help, what about people who are already weighed down by student loans? How can we address existing issues?

Employer benefits and fintech integrations: Promising options

More and more employers are adding a new option to their suite of benefits: employer-assisted student loan repayment. Think of it like retirement savings. Employees pay their monthly loan bills, employers kick in a matching percentage. The debt gets paid off faster so employees can move on with their lives and shed the weight of endless bills. Companies like Vault give HR departments the platform they need to connect employee loan accounts with employer payments. No roadblocks.  

Finicity is proud to power some of these solutions with our data access and insights products. This problem isn’t going to go away on its own and complicated debt forgiveness programs aren’t helping. This 21st century crisis needs 21st century solutions. Simple. Hassle-free. Effective.