data access agreement

Data has driven incredible improvements in the way people have experienced financial services over the last decade. Services that once could only be done at bank branches can now be easily accessed online. And people now have powerful financial information, products, and management tools at their fingertips via their mobile devices. 

The expansion of open banking is creating a new turning point in the money experience. Open banking allows consumers to share their financial data with third-party developers and fintechs in exchange for new services—unlocking the potential of financial data to catalyze another generation of innovation across the industry. Services such as providing financial data to build credit and gain immediate access to capital, initiating a direct payment to a business or individual, and managing household expenses and budgets fundamentally change the boundaries of banking relationships.

Responsible data practices are required for participants to best take advantage of this technology. The key differentiator that sets the world of open banking apart from previous innovation environments is the requirement for consumer consent in data sharing and adherence to core data principles: control, access, transparency, traceability, and security (CATTS).

In order to enable open banking and empower customers, data access agreements (DAA) must be in place to ensure access to financial data that financial service providers need to innovate and provide new services and benefits in a digital world. These agreements define common rules for how two parties—usually an open banking platform or financial data aggregator and a financial institution—will communicate and exchange financial data. More secure data access agreements mean more connections that financial service providers can use to empower consumers with greater control over their financial health. 

Finicity’s Market Leadership in Financial Data

Finicity’s connections cover 95% of direct deposit accounts in North America. And thanks to 20 signed direct access agreements with some of the nation’s largest financial institutions, we support 60% of our traffic with direct API access. We expect that direct-API traffic share to grow to over 80% by the end of 2021, greatly reducing the use of user credentials and screen scraping in the financial services market.  

Since 2017, we have led in signing data access agreements with the top FIs including Wells Fargo, Bank of America, Chase, Fidelity and many others.  And, in just the past year, Finicity has worked to strengthen the open banking ecosystem by creating stronger, more secure data access agreements and partnerships with key financial institutions and fintechs, including Charles Schwab, TD Bank, Citi, Brex, Chime, US Bank, and BMO Harris.  

And where Finicity has been leading, the market is following. Along with an increasing number of financial institutions and other financial service providers, more payroll providers are recognizing that consumers can benefit from the data they hold. As a result, these providers are adopting API connections to open banking platforms that expand the use of financial data in lending, tenant screening, background checks, government verification and personal financial management.  Finicity announced a Direct Access Agreement with the leading payroll provider in September 2020, representing 16% of the payroll provider market.

DAAs provide the broader fintech and financial services community with access, through Finicity, to consumer-permissioned financial data that enables a variety of apps and services across financial management, payments, lending, and beyond. And a key result for all parties is enhanced data stability, accuracy and improved security through reduction of user credentials.

A direct access agreement with Finicity ensures the most reliable data security for financial institutions while still enabling fintechs and financial service providers to deliver solutions that empower consumers and foster financial inclusion. To learn more about becoming a supported financial institution and how that benefits you and your customers, be sure to check out our financial institutions page.

And request a demo today to see how the power of data from Finicity’s open banking platform can accelerate your fintech innovation to get to market sooner.

open banking payroll data access

Payroll data is a tremendous resource upon which fintechs and financial services providers can build better experiences for consumers and, at the same time, enable consumers to benefit more from their financial data.

But enabling access to payroll data isn’t as easy as flipping a switch. And we can’t build better experiences without a simple and trusted process for consumers. This is where open banking comes in. Open banking platforms can unlock payroll data, but such data access has to be done the right way with a consumer-centric model that ensures successful connections and collection of data.

How to Leverage Payroll Data the Right Way

Payroll data is a beneficial resource, but how it’s accessed is central to enhancing the customer experience and ensuring successful data collection. Let’s look at this in greater detail. 

API Connections Vs Credentialed Access

In some cases, data providers look to access payroll data by using a consumer’s credentials. Unfortunately, this model is overly cumbersome for the consumer. Unlike digital banking, where consumers know the data source and have login credentials, consumers are largely unaware of their payroll provider, and in many cases haven’t even set up an account to access a payroll portal. Plus, many employers use a firewall-protected HR portal to enable employees to view paystubs and other income information, which means the employee never directly interacts with the payroll provider. That firewall also protects the payroll data from external access. 

These credentialed-access hurdles make it painful for employees to permission data access and significantly depress successful connections to payroll data. With a low hit rate, financial services innovators or others looking to leverage such data are left with an awkward, sub-par user experience at best and no data at worst.

The best way to leverage payroll data is to provide technology that enables the consumer to easily access their data, and protects them while they do so. This is achieved through direct API connections to payroll providers that eliminate the need for employees to have or know their credentials. It even eliminates the need to know who their employer is using as a payroll provider.

By connecting directly via an API, an open banking platform provider partners with payroll organizations that are equally committed to providing consumers with access to their financial data. The open banking platform can then connect the employee with their payroll provider for them, enabling the employee to more readily benefit from their payroll data and, should they choose, permission access of that data to a fintech or financial service provider. 

Finicity is already leveraging direct API connections to payroll providers and is quickly expanding those tested and proven connections to reach more employers and benefit more employees. We already provide direct connectivity that covers tens of millions of employees in the U.S. Finicity has a history of building partnerships with leading data sources, such as our  direct API connection with the largest payroll provider.

In the case of payroll data, direct API connections have created the best experiences and led to the best outcomes for both our partners and for consumers. This remains consistent with our market push on direct API connections to a broad range of financial institutions.

Consumer-Centric Means Consumer Protection: Operating as a CRA

It’s not enough to promise consumer-centric processes or protection in word only. After all, leveraging payroll data the right way also comes down to how the open banking platform handles the data and how they involve the consumer in that process. 

One of the primary uses of payroll data is in lending. Our Finicity Lend™ solution set, for example, currently leverages payroll data to enhance income and employment verifications necessary for credit decisioning. In this use case, consumers can gain additional protection and strengthen engagement through the Fair Credit Reporting Act (FCRA). These protections hold the data provider accountable for data accuracy and ensure the consumer has a mechanism to dispute the data in case of issues. 

While other data providers claim FCRA compliance, at Finicity we’re not just talk. Finicity operates as a Consumer Reporting Agency (CRA), which means we are legally required to adhere to FCRA requirements. When data providers are delivering income, asset, and/or employment data for the purpose of credit decisioning, operating as a CRA is not only the best way to provide the data, it’s the right way. 

But data access that truly empowers the consumer and keeps data secure doesn’t stop there. We also keep the consumer at the center of all our data-access experiences with our CATTS data principles: Control, Access, Transparency, Traceability, and Security. These principles inform our policies, our products, and ultimately our entire approach to empowering the consumer with their financial data.

It all comes back to trust. Consumer-centric principles, reinforced both in word and in deed, establish trust between data access providers and consumers, as well as with financial institutions, payroll providers, and other financial services providers.

How Can Open Banking Platforms Use Payroll Data?

Payroll data enables financial service innovators to leverage consumer data to improve decisioning and enhance lending processes, as well as create new financial services experiences.

While financial service providers have traditionally relied on ‘physical’ documents, such as bank statements, tax documents, paystubs, and more to verify information about consumers, digital payroll data via open banking provides quick access to all insights necessary to create next-gen financial experiences.

Finicity payroll partnerships provide access that enable or enhance various use cases, such as:

  • Mortgage lending
  • Auto lending
  • Personal lending
  • Tenant screening
  • Background checks
  • Government verification
  • Personal financial management

And where Finicity has been leading the market, the market is following. Along with an increasing number of financial institutions and other financial service providers, more payroll providers are recognizing that consumers can benefit from the data they hold. As a result, these providers are adopting API connections to open banking platforms that expand the use of financial data. 

Employees aren’t the only ones who benefit from consumer-permissioned data. Payroll providers ensure greater security when specific data is only shared with third parties for the use case, rather than released on a large, broad scale. They retain greater control in their role as data stewards.

Payroll data goes even further in delivering a more complete view of a consumer’s financial story when it’s paired with other open banking capabilities, such as validating information with bank transactions and, in appropriate cases, with digitized paystubs—another area where Finicity has led the market. 

Consumers own their payroll data, and they should be able to benefit from it. But to ensure the best experience for the consumer and the financial services innovators looking to use such data, enabling access to that data must be done right. See in action how Finicity is leveraging partnerships with payroll providers and financial institutions to provide technology that empowers consumers to benefit from their financial data and improve their lives.

MVS flexibility simplicity

The traditional mortgage process can feel cumbersome to borrowers and loan officers, especially when the digital solutions dominating our lives have us accustomed to fast, convenient, and simple processes. Slow and complex mortgage workflows are more than inconvenient and unfortunately all too common. They require input at every step, back and forth between multiple partners even for some of the simplest tasks. Traditional, manual mortgage processes can also hinder lenders from reaching the full potential of their organizations.

Fortunately, Finicity Lend’s Mortgage Verification Service (MVS) enables lenders to build a simple, streamlined mortgage verification experience with the flexibility to adapt to different mortgage lending use cases and enhance the lending experience for all.

The Drawbacks of Yesterday’s Mortgage Process

Gathering documents, calling employers, and conducting manual verifications add time to the origination process and can be a source of stress for prospective borrowers who have to hunt down paperwork. All that paper shuffling can also increase the chance of fraud and risk for lenders. High-friction lending experiences are frustrating for borrowers who have become accustomed to digital experiences in all aspects of their lives.

And while adopting a digital mortgage solution can simplify this otherwise cumbersome process, adapting digital solutions can be daunting when your organization is accustomed to a particular traditional workflow. Do you have to ditch everything about your current process? Are the returns of a digital mortgage solution worth the time and resources to transform your organization?

Let’s find out.

Finicity MVS: The Simple and Flexible Mortgage Verification Experience

Finicity Lend’s Mortgage Verification Service addresses these problems with traditional mortgage lending and the concerns lenders face when confronted with the thought of changing their workflow. It comes down to two key components that have been core to MVS’s development from the beginning: simplicity and flexibility.

MVS Simplicity

Thanks to Finicity’s open-banking platform, MVS can deliver the financial data necessary for accurate, GSE-accepted, reliable verification of assets, income, and employment. And it gets better: MVS enables lenders to receive the verifications they need with only a single permissioning experience by the consumer, from multiple data sources. Even adding paystub data to bank and payroll data for a more comprehensive picture of income can still only take one permissioning experience that feels right at home in the digital lifestyle of today’s borrowers.

Data-driven verifications cut the risk of manual verifications and toss out the paper chase that came with ‘paper-based’ (from actual paper to digital documents) processes. The all-in-one, one-touch experience further streamlines and simplifies the lending process and improves the overall experience for both borrowers and lenders, potentially cutting up to 12 days off the origination timeframe.

MVS Flexibility

Every lending scenario is as different as the borrowers that come to you. These unique scenarios mean that there can’t be a one-size-fits-all digital mortgage solution. It needs to be flexible. MVS is flexible enough to adapt to unique mortgage lending use cases and workflows and balance the appropriate level of borrower friction, optimizing the overall process.

With MVS, lenders can request only the data they need to validate income, assets, or employment, or they can request all the verifications at once. No need to sort through unnecessary information to assess a borrower’s risk. For example, a refinancing may not require the asset verification necessary with a new home purchase. MVS provides what you need, when you need it, and in the best, most simplified way with clean, easy-to-read reports.

And while MVS’s one-touch experience is ideal, some use cases or customer experiences require more than one permissioning experience with the borrower. Some consumer flows, for example, only require asset data in one step, and then request income data separately. Or, your flow may attempt a complete verification from transactions only, and you may return to the borrower for a second permissioning experience for paystub data later. MVS can as easily adapt to these two-touch scenarios as the one-touch experience, enhancing lender flow rather than replacing it, and allowing lenders to balance friction with borrowers on their own terms.

Regardless of the permissioning experiences required for accurate and reliable risk assessment, borrowers and lenders will always enjoy a streamlined, fast, secure permissioning process through Finicity Connect for less friction and more time saved. Thanks to this flexibility, MVS helps lenders balance what you believe is the best experience for the borrowers with the tools you need to get the highest possible verification success rate.

With Finicity’s MVS, you can enjoy the benefits of a streamlined, simplified, and flexible digital mortgage experience without sacrificing what makes your lending process unique to your organization. And to top it all off, you get the most accurate data, courtesy of open banking and consumer permissioning. Enhance your lending with Finicity Lend’s MVS.

digital adoption barriers

2020 accelerated the adoption of many remote and digital solutions across nearly every industry. And while mortgage lending has some catch-up to play relative to some other industries in adopting digital solutions, change is happening, and it’s happening fast. Even if you’re not adopting digital mortgage solutions, many of your competitors are. 

But digital adoption can certainly come with its own challenges. These barriers, however, are not impenetrable, and a targeted approach to overcoming barriers to digital adoption can set you on your way to enjoying all the benefits of a digital mortgage experience. 

Why Adopt Digital Mortgage Solutions?

Digital adoption in mortgage lending involves integrating a digital mortgage solution, such as a digital verification of assets, or transforming a traditional workflow to a digital-first model. Digital solutions enable lenders to verify income, assets, and employment without the high-friction interactions with borrowers that were complicated by pandemic restrictions. 

As digital mortgage solutions have proven during the pandemic, digital adoption enables mortgage lenders to be more nimble and adapt to unexpected disruption in the market. Digital adoption also streamlines the origination process. Fannie Mae found that digital verifications can reduce cycle time by up to 12 days. And that real-time data is more accurate and helps mitigate fraud and credit risk. Digital adoption has also picked up traction as it better satisfies the expectations of today’s digital consumers.

So what’s keeping more mortgage lenders from adopting digital solutions? 

Barriers to Digital Adoption

Changing a mortgage lending workflow is no light task. Even if you see the benefits to digital mortgage adoption, it’s another issue entirely to actually implement digital solutions and strategies. Understanding the barriers standing between you and a successful digital adoption is the first step toward targeting and overcoming these challenges and enjoying the many returns of a digital mortgage process. Let’s take a look at some of the most common barriers to digital adoption.

1. Apprehensive Teammates and Borrowers

Frequently, the barrier to digital adoption isn’t so much technical as it is about the apprehension of the teammates who will be using the solutions and the prospective borrowers who will give their trust to the solutions. Although many consumers already share their financial data digitally, allowing access to bank account data can be intimidating for borrowers. The fact is, loan officers, processors, underwriters, and other team members may just be more comfortable with their well-worn traditional workflow. 

Overcoming this barrier will require showing teammates that the returns of digital adoption far outweigh the growing pains, and assuring borrowers that the secure consumer-permissioning process actually empowers them with greater control over their financial data. It also helps to integrate a simple-to-use verification technology like Finicity’s Mortgage Verification Service (MVS) that simplifies the entire verification process into a one-touch experience.

2. Integrating Technology with Traditional Systems and Workflows

At the core of digital adoption is leveraging innovative technology and solutions that enhance the mortgage experience. Adapting to new technology, however, can become a barrier when you’ve been relying on the same traditional solutions for decades. Technology must also be able to integrate with a lender’s loan origination software. 

Fortunately, while any adoption involves some learning curve MVS is built to be intuitive and quick to integrate. And as a one-touch solution for mortgage verifications, MVS makes adaptation easy. No more using multiple processes to get the necessary information. Everything you need is in one streamlined process.

3. Changing Trusted Processes

Trust is an integral element of mortgage lending. Borrowers trust lenders with personal information and with the hope and stress of one of the most significant decisions of their lives. And you trust your tried-and-true process to deliver a low-risk, accurate origination. Traditional processes may be out-of-date, slower, and potentially higher-risk than newer processes, but it can nonetheless be difficult to leave that familiar process behind. 

Fortunately, digital adoption doesn’t necessarily involve abandoning everything about familiar processes. Instead, adoption enhances those processes. For example, Prosperity Home Mortgage has implemented a hybrid lending model. They leverage Finicity’s digital verification solutions for a streamlined, competitive experience, but they also still prioritize in-person guidance for borrowers to personalize their lending experience. Prosperity maintained trusted, familiar priorities while augmenting their overall process with digital solutions.

Solutions like MVS also ease the enhancement of trusted processes by enabling a single process to verify assets, income, and employment. That process is also built to satisfy and exceed the expectations of today’s digital borrowers, which means this new verification solution will feel more comfortable and seamless than traditional paper-based processes.

4. Disjointed Strategy and Poor Change Management

Some lenders may have already overcome the other adoption barriers and may be on their way to integrate digital mortgage solutions. However, a disjointed adoption strategy or poor change management can become another barrier to successful adoption. Weak buy-in to the digital adoption at different levels in the organization can slow down the adoption process and prevent proper training and effective synergy between teams. 

A cohesive digital adoption strategy and effective change management involves demonstrating the benefits of digital adoption from the top of your organization on down. Successful adoption requires commitment and coordination from all. MVS can smooth out that commitment and coordination by reducing the amount of change being instituted with a single simple process, making the overall adoption easier to manage.

Target these digital adoption barriers and you’ll be on your way to a successful digital adoption and all the benefits that come from digital mortgage. Finicity’s Mortgage Verification Service can help you do just that.

Finicity Mortgage Verification Service

The mortgage application process should be easier. It should be more accurate. It should involve less risk and less fraud. It shouldn’t be a slog for borrowers or for lenders. It should be as convenient and streamlined as we’ve come to expect from other modernized, digital experiences. 

Transforming the entire underwriting process is a massive undertaking. And while Finicity already provides solutions across all the primary segments of mortgage lending, today we’re reaching another milestone by streamlining the verification of assets, income, and employment into a one-touch, GSE-accepted experience. I’m excited to introduce Finicity Lend’s Mortgage Verification Service (MVS), the faster, more accurate, more empowering verification experience for both lenders and borrowers.

What Is MVS?

Mortgage lending underwent a historic transformation in 2020. Problems that had been minor cracks in the mortgage lending experience became chasms as lenders had to rapidly adapt to physically-distanced workflows. But despite the COVID-19 pandemic, ensuing economic fallout, and record-breaking volume—which, while temporarily obscuring them, does not eliminate the cracks—certainly accelerating the need for a new mortgage experience, that need was already apparent. 

Paper-based mortgage processes take more time—something many lenders are already lacking with today’s high volume—and they’re more prone to fraud. Slower, less streamlined solutions also reduce organizational agility, preventing lenders from keeping pace both when the market is booming and when the market again normalizes. And the high-friction paper-chases are annoying for borrowers that are already acclimated to fast, convenient, digital solutions. 

We wanted to deliver a mortgage lending experience that exceeds the expectations of today’s borrowers while also enhancing outcomes and agility for lenders and their stakeholders. That’s why we designed MVS to deliver a one-touch, GSE-accepted digital verification of assets, income, and employment. Now you can complete all necessary verifications in one seamless process. It’s a fast, secure, anytime-anywhere experience that gives the borrower control over their financial data while also providing the lender with a real-time, accurate picture of the borrower’s financial health. 

MVS is powered by Finicity’s open-banking platform. This means that mortgage lenders get access to extended lengths of real-time data, analyzed and categorized thanks to advanced data intelligence. We also assure the most accurate data and keep the consumer at the center of the data-sharing experience with clear transparency and the ability to dispute reports. Access to reliable, real-time, multi-sourced, and even cross-verified data enables the most accurate verifications, setting you on your way to get rep and warranty validation from GSEs and investors. 

And because every lending use case and process is unique, we’ve designed MVS to be flexible and accommodate everything from refinancing to new purchases, including both qualified and non-qualified mortgages. We’ve also made it easy for mortgage lenders to integrate MVS into their workflow with several flexible integration options.

All of these features come together to build a consumer-centric lending experience that improves ROI for lenders.

Why Should Lenders Use MVS?

MVS is more than a product, it’s a partnership with Finicity that enables lenders to benefit from our open banking platform and our market-leading, secure connections to financial institutions. Through those connections, lenders can get the accurate data necessary to verify assets, income, and employment, and enhance their overall decisioning and underwriting processes. And with GSEs tightening their rep and warranty relief policies due to COVID-19’s impact on consumer income and employment, lenders will need the most reliable data from the most reliable sources.

MVS enables a digital mortgage experience, allowing lenders to reap the benefits that come from digital streamlining. In fact, validating assets, income, and employment digitally can cut up to 12 days off the origination process. MVS takes digital streamlining even further by completing these verifications with only a single borrower interaction. You can then refresh those verifications at close at no cost and without reengaging the borrower. With MVS, you complete more originations in less time—time that’s crucial for lenders to remain agile in a crazy, high-volume year like this. More time opens room for more originations and more commission.

The convenience of digital verifications and the simple, streamlined consumer permissioning process also enhances the lending experience for borrowers and helps them leave more satisfied and more likely to refer their lender to friends and family. MVS’s seamless and customer-centric digital experience enables lenders to distinguish themselves, especially against digital laggards, and gain a competitive edge.

We’ll also set you up for success with Finicity’s Adoption Best Practices training so you can hit the ground running and start reaping the rewards of a streamlined, digital mortgage process. 

With MVS, everybody wins. 

Don’t settle for yesterday’s mortgage lending experience. You deserve better. And so do your borrowers. Use Finicity Lend’s Mortgage Verification Service to build the foundation of your enhanced mortgage lending experience. Find out how to integrate MVS into your mortgage lending process and to learn more about how Finicity provides other mortgage solutions in prequalification, underwriting, funding enablement, secondary quality control, and servicing.

data aggregator FCRA CRA

Consumers can leverage their financial data to improve their financial health, gain access to financial services, and enhance control over their finances. In order to benefit from these financial outcomes, consumers provide access to their financial data to end users through data access providers. If data access providers truly want to empower consumers, they must protect that data and ensure that control of the data remains firmly in the hands of the consumer. And a commitment to protect data in word only isn’t enough. 

Data access providers that share financial data they have assembled for the purpose of lending, insurance, and employment, must adhere to the Fair Credit Reporting Act (FCRA). Operating as a Consumer Reporting Agency (CRA) is the best way to ensure a consumer-first lending approach that both protects and empowers borrowers. Anything less is just words.

Let’s look at this in greater detail. 

The FCRA and Financial Data Sharing

The Fair Credit Reporting Act protects consumers by establishing and protecting the right for individuals to dispute inaccurate data in consumer reports and get those errors fixed. In order to maintain transparency and ensure accuracy, the Act also requires that consumers have access at any time to any personal financial data provided for credit or insurance eligibility decisioning. 

While FCRA has historically applied to credit bureaus and certain specialty CRAs, like tenant screening and medical information companies, the Act has a broad scope of coverage and is not limited to traditional credit reporting or a narrow set of CRAs. Third-party data access providers that power financial data permissioning between lenders and consumers use a different type of data sharing model for which FCRA compliance provides an equally critical component of protecting consumers when they access credit and other financial services.

As it stands, the FCRA applies to consumer reports that CRAs provide to third parties for certain permissible purposes described in the FCRA, such as determining a consumer’s eligibility for credit or insurance. Consumer reports can only be provided and used for these permissible purposes. If data access providers, also known as data aggregators or data agents, are assembling a consumer’s financial data and sharing it for the purpose of credit or insurance decisioning, shouldn’t those providers be considered CRAs, and shouldn’t the FCRA apply to their data sharing?

In order to protect and empower consumers, we think so.

Empowering Consumers with Compliant Data Sharing

FCRA compliance is the only sure way to guarantee fairness, accuracy, and transparency when data access providers assemble consumer financial data and provide it to lenders or insurers to make credit or insurance decisions. 

A current regulatory interpretation of the FCRA suggests that an organization does not become a CRA when it forwards financial data to a third party at a consumer’s request because they are simply engaging in “permission-based sharing” on behalf of the consumer. Finicity believes this interpretation of the FCRA was meant to address different circumstances, such as where a mortgage broker forwards a consumer’s application and credit report to prospective mortgage lenders at the consumer’s request. This and other “conduit”-like functions fall outside the FCRA. 

We do not believe, however, that this interpretation was intended to cover situations where a data access provider or other party “assembles” consumer data to provide to financial data users. Such a broad reading of the “permission-based sharing” interpretation would run counter to the purpose of the Act and undermine the protections the FCRA was created to uphold. 

Why can’t data access providers simply promise protections to consumers? Such assurances are of course important, but can vary from provider to provider. Consumers are best served when all data access providers are held to a common standard of consumer protection. Operating as a CRA requires that data access providers adhere to the FCRA and provide specific dispute and disclosure processes that enable consumers to access and view their data, dispute any errors, and understand how their data is being used. 

If a data access provider is delivering consumer data it has assembled to creditors for use in credit decisioning, and is not functioning as a CRA, it is not adhering to the FCRA and not protecting consumers as well as it could.

With open banking and digital financial services continuing to pick up speed, it’s more crucial than ever that the industry demonstrate that the consumer-permissioned data sharing process is conducted fairly, accurately, and with transparency for the consumer. Those positive outcomes follow when a data access provider, in appropriate circumstances, is functioning as a CRA and is legally required to adhere to the FCRA. 

Only when such protections are in place can consumers reliably enjoy the empowerment and improved financial outcomes they deserve. And the financial services industry can similarly benefit from the growth and innovation that comes from the increased acceptance of leveraging consumer-permissioned financial data for the benefit of consumers. To learn more about the benefits of FCRA compliance for data access providers, check out our whitepaper.

financial inclusion access

According to FICO, “79 million people in the U.S. have [credit] scores below 680, a common lender threshold of acceptable credit.” And “53 million people in the U.S. do not have enough data in their credit files to generate a FICO® Score.” With low scores or no scores, these tens of millions of Americans don’t have access to loans to help them take the next step in their financial journey. Additionally, many Americans don’t have access to other financial products and services that could help them be more financially stable. 

These consumers aren’t seeing the benefits of financial inclusion or, as the World Bank puts it, “access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit and insurance—delivered in a responsible and sustainable way.”

While these consumers may not have credit in the traditional sense or access to financial services, many have money flowing in and out of their accounts and may be perfectly capable of repaying their debts. So how can financial inclusion improve to include those who would be excellent candidates for financial products and services, even if their credit scores are low or nonexistent? Here are two crucial ways to improve financial inclusion:

  • Financial institutions need to look at the whole picture of financial health—not just the traditional measures of creditworthiness or simply the propensity to repay.
  • Consumers need to have access to financial services and products in place of high-risk, nontraditional lenders or accounts.

Keep reading to learn why these are important and how to make them happen.

A Holistic Picture of Financial Health

Currently, lenders gauge creditworthiness by looking at the five Cs of credit:

  • Character. What is reflected in the applicant’s credit history?
  • Capacity. What is the applicant’s debt-to-income ratio?
  • Capital. How much money does the applicant have?
  • Collateral. Does the applicant own an asset that can back the loan?
  • Conditions. What is the purpose of the loan? What is the amount involved? And what are interest rates like?

While these five Cs are definitely good indicators to take into account, financial institutions miss out on lending opportunities when these are the only criteria they look at. Lenders should look at the whole picture of financial health, which includes indicators besides good credit. These can include bank account health, responsible spending behavior, and bill payment history.

Bank account health is a great indicator that consumers are responsible with their finances:

  • They are prepared for financial crises. They don’t overspend and they have started a retirement account.
  • They have both a savings account and an emergency savings account.
  • They stay above the minimum balance requirement for checking accounts.

When consumers demonstrate responsible spending behavior, they avoid lifestyle inflation and stick to a budget. Their expenses do not exceed their income. 

Bill payment history not related to credit may include utilities, internet and phone, and subscriptions. If consumers are paying all their bills and paying on time, they’re likely a good candidate for financial services.

Financial inclusion improves when financial institutions look at the whole picture of financial health and not just the traditional measures of creditworthiness or simply the propensity to repay.

High-Risk Loans

Currently, consumers with low or no credit typically have access only to high-risk loans. These loans often charge high fees and interest rates, may require big-ticket items for collateral, and may put a cosigner on the hook if the loans are not repaid. Payday lenders, for example, can legally charge annual interest rates of up to 400 percent. Clearly, high-risk loans are not a responsible or sustainable way for consumers to improve their financial situation.

On the other hand, the best loans out there are typically available only to people with high credit. While interest rates are currently very low, “borrowers will likely face stricter lending standards as lenders try to protect against the coronavirus downturn,” writes Zina Kumok for U.S. News. While these loans are great options for those who qualify, standards for qualification are high and unattainable for many borrowers.

Financial inclusion improves when borrowers have access to financial services and products in place of high-risk, nontraditional lenders or accounts.

Bridging the Gap between Financial Exclusion and Financial Inclusion

To bridge the gap between what is currently available and what could be available, consumers and lenders need to have access to alternative data. This data can be provided through transactions and account details via open banking connections.

Two examples of this solution are Experian Boost and UltraFICO.

Experian Boost is a service that can do the following:

  • Raise FICO® Scores quickly
  • Give credit for paying non-credit-related bills
  • Give consumers free access to their Experian credit report and FICO® Score
  • Provide Experian credit monitoring and alerts

An UltraFICO™ Score aims to enhance consumers’ FICO® Scores by taking sound financial behavior into account. If consumers consistently have cash on hand and their accounts maintain a positive balance, their UltraFICO Score may actually be higher than their FICO Score. According to UltraFICO, there are “15 million people in the U.S. who can receive an UltraFICO™ Score, even if [they] don’t have enough credit history to generate a FICO™ Score.”

An UltraFICO Score is generated instantly, giving you access to good credit decisioning as soon as you need it. With the ability to improve or create traditional credit scores, consumers have greater access to traditional loans and lower interest rates, giving them a boost towards their financial goals. 

Our Finicity Lend™ data services are another resource to improve financial inclusion. Made possible by our open banking platform, Finicity Lend gives consumers the power to permission data access and gives lenders access to the data they need to make credit decisions. With Finicity Lend, lenders can make decisions that benefit them and consumers, and consumers are empowered to be fully involved in the process.

Millions of Americans are currently financially excluded, so improving financial inclusion is crucial to help them reach their financial goals. When financial institutions look at the whole picture of financial health, and when consumers have access to responsible financial services and products, financial inclusion improves and everyone benefits.

financial inclusion open banking data

A 2019 study from the University of St. Andrews School of Management gave financial management apps to participants and measured how having those apps affected the participants as compared to a control group. At the end of the study, the proportion of those who were confident about loan repayments to those who weren’t was 17.2 percent higher in the test group than in the control group. With a little information and guidance, the participants became more confident about their finances—and that is key to financial inclusion. 

Financial inclusion improves when consumers have access to and control over their personal financial data. At Finicity, our open banking platform puts consumers in control of their data, which in turn leads to better financial literacy, inclusion, and outcomes. 

Let’s take a look at how access and control improve financial inclusion, giving consumers better opportunities to make and reach their financial goals.

Access through Open Banking

In the past, and even still today, consumers’ access to their financial data has largely been limited to monthly paper or PDF statements. But recent innovations have improved consumer access, allowing consumers “to access and consolidate statements electronically and to better understand their financial situation through personal financial management and budgeting tools.”

How does this increased access help consumers? With data and fintech apps and services at their fingertips, consumers become more financially literate. It’s a simple equation: knowledge plus basic skills plus financial motivation equals better financial behaviors.

In the same University of St. Andrews study cited above, the authors found that using fintech apps was a gamechanger for the participants: “[The participants] expressed greater confidence in their understanding of loan repayments and demonstrated improved financial literacy…. Those receiving the smartphone apps proved more resilient when subject to a financial shock and were more likely to keep track of their income and expenditure.”

To help improve financial inclusion, financial institutions can give consumers access to their data through open banking connections and provide fintech apps that help consumers become more financially literate. The standard to aim for is “account ownership equals data ownership.” 

What does this look like in practice? It looks like consumers being able to give third-parties permission to access their financial data on their behalf. It looks like the ability to see and access their data easily within their financial institution’s web portal. It looks like consumers reaping the benefits of big data on an individual and household basis.

Financial inclusion improves when consumers have access to their financial data in standardized, meaningful ways. That way, “individuals and families across the socioeconomic spectrum [have] access to financial tools once reserved for the wealthy. Whether it’s personal financial management tools, the ability to contribute data to credit scoring, or participating in peer-to-peer payment platforms, access to personal financial data changes lives.”

Control through Consumer-Permissioned Data

Once consumers have access to their data, control is the next crucial ingredient for financial inclusion. Historically, consumers haven’t had much control over how their data is used, who has access to their data, how frequently their data is accessed, or how long their data is retained. Without control, access doesn’t mean much.

Today, consumers have more control over their data than ever. Consumers are now able to “opt-in” their financial data, which can help streamline the loan-application process, give them access to better loan terms, and improve their generic credit scores. This level of control is possible through OAuth connections that provide tokenized access so consumers can permission and revoke these tokens at any time from the financial institution. Tokens also keep account details with the financial institution enhancing security and lowering risk.

With this relatively high level of control, what should be next to improve financial inclusion? Informed consent is a good place to start. Consumers need to have intuitive navigation experiences using language that is easy to understand. It’s not informed consent if consumers don’t understand the information! 

To make informed consent possible, financial institutions should provide a standardized permissions interface. Consumers should be able “to easily view, modify, add, and revoke permissions across their library of financial services. When permissions are buried out of reach, consumers do not have the control they deserve. Power only exists when control can be exercised and managed.”

Access and Control in Practice

At Finicity, we aim to help financial institutions and consumers improve financial inclusion through consumer access and control. To improve consumers’ access to and control over their financial data, we’ve connected financial institutions and payroll providers via financial data APIs, enabling consumers to permission their data for use in third-party applications or solutions. 

For example, our Finicity Lendsolution gives consumers and lenders access to the following data:

  • Assets
  • Income
  • Employment
  • Cash flow
  • Transactions
  • Statements 
  • Scoring attributes

This data can be used for everything from personal loans to small business loans. It’s real-time data that consumers can grant third parties access to in order to speed up the loan process. Its usefulness doesn’t end there, though. This data can also be used in just about any financial app, from budgeting to accounting to investments to account initiation and payments. The data is also FCRA-compliant so consumers can see the data used and dispute any inaccuracies.

Apps and services like these help improve financial inclusion. As the University of St. Andrews study found, people with access to this kind of information experience

  • improved “financial knowledge, understanding and basic skills,”
  • a greater likelihood to plan for the future,
  • a “greater sense of self-efficacy and a greater confidence in their ability to improve financial decision-making through engaging with technology,” and
  • “better financially capable behaviours.”

Financial inclusion improves when consumers have access to and control over their personal financial data. Access and control allow consumers to be full participants in their financial journeys, giving them the best chance to make and reach their financial goals. To learn more about financial inclusion, read the first blog in our financial inclusion series, “Improving Financial Inclusion: Cash Flow Analytics.”

ACH transfers payments

There are many ways to verify online Automated Clearing House (ACH) payment details for transfers. Voided checks, micro deposits, pre-validations and account scores all validate ACH account payment details in one form or another. They also take more time than is necessary and typically can only verify something rather than adding key data to what the consumer has provided.

This is where open banking and open banking platforms make verifying account details and speeding up the ACH payment process simpler for everyone. Consumer-permissioned data pulled straight from bank accounts makes verifying accounts simple. It can also provide account details like account owner or balances that make facilitating payments easier and less risky for both sides of the transaction.

Finicity’s open banking platform provides a complete suite of data services with Finicity Pay to verify essential account details, owners, and balances that are needed to charge, get paid, or set up an account with confidence. Finicity Pay enables payments and validates funding sources. You can also seamlessly verify loan account details, including student loans, to detect eligibility for refinancing, loan consolidation, or to support employer student loan repayment and other benefit programs. 

This means that Finicity Pay both satisfies Nacha’s WEB Debit Rule but also speeds up the ACH payment validation process and enhances fraud protection. Finicity is a Nacha Preferred Partner, recognized for offering products and services that align with Nacha’s core strategies to advance the ACH Network.

Finicity’s instant verification solution takes advantage of Finicity’s open banking platform to use API connections to the many financial institutions in the US and Canada. Consumers permission the use of their account details which are then used for approved ACH payments, account creation or other permissible uses. The consumer can complete the verification process in minutes rather than waiting hours or days as in other solutions. Meaning their ACH transfer can process more quickly or they can get funds right into their new account.

Other ACH validation solutions either don’t provide the option for as much key data, only factor in account and routing number, or take much longer, up to a week in some cases. You may remember the days when you needed to provide a voided check to set up direct deposit transactions. Or to set up online accounts that are connected to your existing checking account you had to respond with how much was deposited into that checking account. There’s also pre-validating by providing information that is verified before the ACH transfer happens, which can take up to a week. Those days are over, thanks to Finicity Pay.

Some digital solutions are available but are limited either by what they provide, a score or likely probability that the account is good or has funds enough to cover the transaction, or only cover certain segments of the industry, as in providing details for accounts from certain FIs but not the industry as a whole.

Finicity’s instant verification can not only validate account details but can also provide account owner and account balance details to further mitigate risk and make ACH transfers easier.

Learn more about Finicity Pay or how it fits your needs by requesting a demo.

Nacha WEB Debit

One thing we’ve learned this past year – if we didn’t already know – is how we pay, get paid, or otherwise move money, is changing. One almost wonders what the fate of paper money will be in the future. Until that is sorted out, we’ll continue exploring ways to improve the money movement process. That’s where open banking comes in. Through open banking we’re able to introduce new tools that secure and simplify the money experience. One area enhanced by open banking is Automated Clearing House (ACH) payments. 

To that end, we’re very excited that industry innovator SWBC has chosen Finicity Pay™ for instant account verification of online Automated Clearing House (ACH) payments. This partnership simplifies the payment process while also satisfying Nacha’s new web debit rule, planned to take effect March 2021.

NACHA’s New Rules

Currently, ACH Originators of web debit entries are required to use a “commercially reasonable fraudulent transaction detection system” to screen web debits for fraud, according to Nacha’s website. This existing screening requirement will now be strengthened to make it clear that “account validation” is a solution designed to enhance fraud protection.

Specifically, originators of debits are responsible for validating accounts to ensure the account is legitimate and open prior to the first use of an account number or after changes to the account number by a customer. While the rule doesn’t require the account owner to match or be validated, Finicity Pay also enables companies to determine the account owner on file with the bank for heightened validation and further fraud prevention.

While there are many ways to validate accounts, Finicity’s open banking platform makes it easy to receive validation in real-time thanks to APIs and direct connections with financial institutions. Web debit originators don’t need to wait on manual verification, microdeposits, pre-notifications or any other service for dependable, accurate account verification.

How Finicity Pay Fits In

Finicity Pay will verify the essential account details, owners, and balances that are needed to charge, get paid, or set up an account with confidence.  As a complete suite, Finicity Pay enables payments and validates funding sources. It can also seamlessly verify loan account details, including student loans, to detect eligibility for refinancing, loan consolidation, or to support employer student loan repayment and other benefit programs. This means that Finicity Pay both satisfies Nacha’s web debit rule but also speeds up the payment validation process and enhances fraud protection. Finicity and SWBC are Nacha Preferred Partners, recognized for offering products and services that align with Nacha’s core strategies to advance the ACH Network.

SWBC provides financial institutions, businesses and individuals a wide range of services, including insurance, mortgages, wealth management, employee benefits, among others, and is a valued addition to our list of providers.To read more about this announcement, please read the press release here. And to learn more about Finicity Pay, check out our website at https://www.finicity.com/pay.