How MoneyLion and Plaid are improving credit access through data integration

In modern financial services, partnerships that enhance user experience and expand access to credit are becoming increasingly crucial. A recent collaboration between MoneyLion and Plaid exemplifies this trend, bringing together MoneyLion’s credit marketplace with Plaid’s Layer and Consumer Report solutions. This integration aims to streamline the loan application process and provide a more comprehensive view of borrowers’ financial health.

At the heart of this partnership is the incorporation of cash flow data into the credit decisioning process. By allowing users to securely link their bank accounts during the initial stages of a loan application, lenders can now access a more holistic picture of an applicant’s financial situation. This approach not only promises to benefit traditional borrowers but also opens up new possibilities for those typically underserved by conventional credit models, such as young adults and recent immigrants with limited credit histories.

To delve deeper into the implications of this partnership and its potential impact on the financial services industry, we spoke with Jonathan Gurwitz, Credit Lead at Plaid, and Tim Hong, Chief Product Officer at MoneyLion. Their insights provide a window into how this collaboration could shape the future of credit evaluation and consumer finance.

Integration and User Experience

How does the integration of Plaid’s Layer and Consumer Report solutions into MoneyLion’s Engine marketplace change the user experience for consumers seeking loans? Can you walk us through the new pre-qualification process from a user’s perspective?

Jonathan Gurwitz, Credit Lead, Plaid: During the early stages of a loan application, borrowers usually provide basic financial details to explore available offers. While this offers a rough estimate, it doesn’t capture a full picture of the borrower’s financial health. What makes the combination of Layer and Consumer Report unique is its ability to seamlessly connect bank accounts during this initial phase, enabling cash flow underwriting earlier in the customer journey. This provides lenders with a more comprehensive financial view to deliver more curated loan offers and borrowers a more seamless application experience.

Tim Hong, Chief Product Officer, MoneyLion: By integrating Plaid’s Layer onboarding platform and Consumer Report cash flow tool, MoneyLion enhances its decisioning engine and credit marketplace, further enabling real-time prequalified offers of credit for consumers.  Utilizing these capabilities, MoneyLion users can quickly and securely link their bank accounts and get prequalified for credit products in just a few clicks. Unlike traditional credit models that rely on credit scores, this approach allows lenders to utilize cash flow data, offering a more comprehensive view of a consumer’s financial health in their decisioning making process.

For lenders using MoneyLion’s marketplace, they also gain access to Plaid’s financial insights, which further benefits credit underwriting, streamlining risk management, and expanding credit access for underserved borrowers. This partnership not only broadens access to credit, but also improves the overall user experience for both lenders and consumers, allowing lenders to access the right consumers through MoneyLion’s distributed partner network.

Impact on Underwriting

With the addition of real-time cash flow data to traditional credit reports, how do you anticipate this will affect underwriting decisions? Are there specific segments of borrowers you expect to benefit most from this more holistic financial picture?

Jonathan Gurwitz, Credit Lead, Plaid: Cash flow data can be valuable across the credit spectrum, but there are several borrower segments that we expect to disproportionately benefit from advances in cash flow underwriting. Young people, recent immigrants, and others are often known as “credit invisibles” who have no or thin credit files. Estimates from the CFPB suggest that as many as 45 million American adults fall into this group. With cash flow underwriting, these credit invisibles can share a more holistic financial picture with lenders. Lenders in turn can use this data to make more competitive loan offers to consumers.

Data Privacy and Security

As this solution involves sharing sensitive financial data, what measures have been put in place to ensure data privacy and security for consumers? How are you addressing potential concerns from users about sharing their bank account information during the loan application process?

Jonathan Gurwitz, Credit Lead, Plaid: First, to set context, consumer privacy and security are two of the core design principles for what and how we built products at Plaid. Our information security program is designed to meet or exceed industry standards, and we use many different controls to keep personal information safe. 

We understand how sensitive it is for consumers to connect their financial accounts and share cash flow data with lenders. Layer provides consumers with clear transparency and full control every step of the way. The experience would only show up for consumers that have opted to save their financial information with Plaid through previous interactions, and once that’s been validated, we then allow consumers to edit and update their personal information before sharing it with the app or service. On the backend, we run a variety of risk checks including device identification and mobile carrier signals to ensure that the borrowers’ details are not compromised in any way. 

Future of Credit Decisioning

Looking beyond this partnership, how do you see the landscape of credit decisioning evolving in the next 3-5 years? Do you anticipate cash flow data becoming a standard component of credit evaluation across the industry?

Jonathan Gurwitz, Credit Lead, Plaid: Through innovation in both the lender and consumer experience, we expect to see cash flow data as ubiquitous as traditional credit data over the next 5 years, if not sooner. We see several important catalysts driving this shift. 

1. Consumers, especially young people with less credit history, are increasingly comfortable sharing bank data with lenders as part of a credit application process. In fact, 8 in 10 (83%) consumers are comfortable sharing proof of primary income, and 73% are comfortable sharing bank transaction and utility payment history for better loan outcomes. 
2. Cash flow data is also becoming easier for lenders to collect and use, with Plaid Layer providing a seamless experience to embed in application flows and Consumer Report giving lenders off the shelf cash flow insights and attributes. In fact, today’s announcement with MoneyLion shows, cash flow data is now available in the places that consumers shop for loans like digital marketplaces.
3. We’ve also seen greater enthusiasm from regulators and consumer advocates on the promise of cash flow underwriting as open banking becomes more of a reality in the US.