Alternative Data Federal Reserve

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.