Lending, Member Exclusive

Lending Briefing: Customers would share data to improve their creditworthiness

  • Over 75% consumers believe that a credit score shouldn’t be the only determinant for loan eligibility.
  • In the absence of lending products that fit their needs, consumers are turning to fintechs and their families to avoid predatory loans or rejections.
close

Email a Friend

Lending Briefing: Customers would share data to improve their creditworthiness

Credit scores have been waning in popularity for a while now, as consumers and financial services look towards other data such as income and cash flow trends to determine people’s credit risk. 

At the moment, at least 60% of employed people in the United States don’t think their credit score accurately represents how financially responsible they are. The biggest issues revolve around updated data and a reevaluation of what factors into the credit score, a recent survey points out

Most consumers believe that a credit score shouldn’t be the only determinant for loan eligibility – they believe that information about utility bills, income and bank account balances paint a more accurate picture of their credit risk situation.

At least 71% of consumers expect their data to be up to date within the last 24 hours. Similarly, 67% think that income is the most crucial addition they would like to make to their credit score, followed by utility and phone bill payment records. 

Non-prime consumers are also eager to share information, with 80% reporting that they would share information about payroll and income with their FIs. 

However, when FIs fail to meet consumers where they are, most have to look for a viable recourse. For example, 66% of consumers with income of less than $50,000 and 79% of those with a poor credit score will ask friends or family members for money. The data reports more than a third of this segment asks for money more than twice, however 89% pay it back. 

These statistics highlight the shortcomings of the current lending products on the market. More than 60% of the consumers polled want their FIs and fintech to offer “personalized financial experiences” like automatic credit line adjustments or proactive loan repayment plans based on consumer income. 

"This particular data point tells a sad story about people in need being failed by the financial system," said Lin. "These folks may have feared being denied or are receiving high-interest options. They were mischaracterized as uncreditworthy with an almost 90% repayment rate.  There's no reason why a bank or fintech couldn't have offered them a solution, something like EWA or a cash-flow based loan, tailored to their financial needs." said Kurtis Lin, co-founder, and CEO of Pinwheel.

Chart of the week

Source: Future Market Insights

Open Banking is spurring a new wave of interest in the embedded lending space. By linking multiple consumer accounts within one platform, these companies are able to provide a more holistic view of a consumer’s financial situation. 

In highly regulated environments like NA and the EU, regulatory complexity continues to deeply impact embedded lending products. NA and the EU also display highly consistent demand for these products but most compete with rising competition in the regions.

What we're writing

How technology is changing the debt collection market

New digital methodologies are opening the doors for lenders to build deeper and more profitable relationships with their customers while increasing the efficiency of their collection processes.

Deep Dive: What’s in the black box? The challenges of explainable AI in digital finance

In the wake of reports of discrimination and negative impacts on consumer wellbeing, regulatory scrutiny is increasing on FIs that use AI models. AI is central to digital finance – but do we understand how it truly works?

How FNBO built Bend, an in-house credit card as a service offering with Marc Butterfield

FNBO’s Marc Butterfied joins us on the podcast to discuss Bend, the bank’s in-house credit card as a service offering, and its work with Greenlight to launch a credit card used by families and kids.

What we’re reading 

FICO’s ubiquity and lender complacency

In the first installment of a three-part credit-focused series, Max Liebeskind and Jeremy Solomon of Nyca Partners write about how FICO became such a central part of US consumer credit.

Genesis creditor groups' loans amount to $1.8 billion and counting

In addition to the previously reported group of Gemini customers owed $900 million, there are two other groups of Genesis creditors being represented by lawyers, CoinDesk has learned.

Eurozone bank lending predicted to fall for first time since 2014

Eurozone banks are expected to cut lending next year for the first time since 2014 as countries across the region fall into recession, the Financial Times reports. 

Digital lending platform market to hit $59 billion by 2032, says global market insights

The digital lending platform market valuation is anticipated to cross USD 59 billion by 2032, as reported in a research study by Global Market Insights Inc.

Somehow, Blueacorn (who?) and Womply (who?) became the faces of fintech in congressional investigative report on PPP fraud

According to a newly published congressional committee investigative report, fintechs facilitated PPP fraud. How this happened is laid out in 130 pages of detail that seemingly puts the brunt of the blame on Blueacorn, a purported fintech that was paid $1 billion in SBA processing fees for its role in facilitating PPP loans.

Rising credit risks pose huge challenge for the worst polluters

Companies facing the largest climate crisis-related losses have more than twice as much rated debt now than when the Paris Agreement was unveiled.

When your boss becomes your banker

More companies are finding ways to offer financial services such as loans or pay advances as the cost of living crisis deepens. What is the risk?

0 comments on “Lending Briefing: Customers would share data to improve their creditworthiness”

Announcement, Member Exclusive

Welcome to the Tearsheet PRO Newsletter

  • We're excited to introduce our new member-only newsletter, featuring fresh and exclusive content from Tearsheet Editors Zack Miller and Iulia Ciutina.
  • Tearsheet PRO is designed to connect the dots, challenge conventional thinking, and keep your finger on the pulse of established and emerging trends. In your inbox every Wednesday.
Iulia Ciutina | February 02, 2023
10-Q, Member Exclusive

Weekly 10-Q: Check cashing fees are getting an overhaul from New York’s financial regulator

  • The New York State Department of Financial Services is putting into practice an updated check cashing regulation following the proposed regulation announced in June last year.
  • And, feeling the heat of the economic downturn, JPMorgan's board has decided that CEO Jamie Dimon will take home the same base pay in 2023 as he did last year -- with no special award or bonus.
Sara Khairi | January 31, 2023
Blockchain and Crypto, Member Exclusive

Bankchain Briefing: Banks onboard the blockchain train

  • The lawsuits and insults season is in full swing within the unregulated cryptocurrency space.
  • But cryptocurrency is just one facet of blockchain technology. Tearsheet asked experts for commentary on how traditional banks are experimenting with blockchains.
Lindi Miti | January 27, 2023
Green Finance, Member Exclusive

Green Finance Briefing: VCs are betting on climate tech amid a broader down market

  • Climate tech is accelerating at unprecedented pace, in contrast to the broader tech sector, with global VC funding reaching $70 billion in 2022.
  • This year, however, the growth rate of the climate tech sector is expected to moderate due to a challenging economic backdrop.
Iulia Ciutina | January 20, 2023
Member Exclusive, Payments

Payments Briefing: On Gen Z’s changing relationship with digital payments

  • This week, we talk about Gen Z’s changing preferences when it comes to sending and receiving money digitally.
  • We also discuss PayPal’s evolving BNPL strategy in a crowded market.
Ismail Umar | January 19, 2023
More Articles