Online Lenders, Partner

Without the right data, your bank could be turning away qualified borrowers

  • Using alternative data provides a more holistic view of a consumer's creditworthiness.
  • Financial services expert Gary Harvey explains how FIs can achieve this using the right data sets.

Email a Friend

Without the right data, your bank could be turning away qualified borrowers

With interest rates rising, there is growing pressure in the lending space to provide a seamless, positive customer experience that helps lenders earn and retain customers. Today, borrowers expect fast, low-friction lending options to be available to them, and with the market changing quickly, bankers need to be in a position to expand their lens of creditworthiness to capture more applicants.

Too often, bankers make lending decisions based on a limited view of an applicant's financial circumstances, or ability to repay a loan, potentially leading them to decline borrowers whose more comprehensive financial picture may confirm they could be qualified, long-term customers.

The need for a more holistic view

Reviewing a loan applicant’s traditional credit report is an excellent place to start when determining creditworthiness. But bankers can achieve a more holistic view by layering credit report data with income and employment data. Accessing this expanded, cloud-based information and incorporating historic payroll insights into risk models can help financial institutions make more confident decisions and potentially lend to more applicants. In fact, including income and employment data can help nearly four million more consumers move to prime or super-prime classifications by helping to create a more complete and attractive financial picture that encourages lending.[1]

For years, bankers have relied on consumer-supplied data, including W-2 forms, stated income, and paper pay stubs. Still, they often could not guarantee that the information was authentic and not altered in any way by the applicant, or outdated even before it got to them.

Today that is changing, as information such as rental, telecom, and utility payment history is more readily and instantly available in the library of data that can help banks better evaluate a borrower’s true creditworthiness. This so-called “alternative” data better allows financial institutions to assess a customer's propensity to repay through a wider lens, providing a more comprehensive view of their financial history as part of the bank’s decisioning process. Through access to deeper data sets, bankers that recognize prospective borrowers as more than just their credit score can develop a methodology to responsibly say ‘yes’ to qualified borrowers within currently underserved demographic groups. Using this alternative data throughout the loan decisioning process may help more members of the broader community take the next step in their credit journey.

By automating the process of accessing alternative data, bankers can also mitigate the risk that the data has been modified or changed by the applicant, or is outdated even before it gets to them. Credentialed verifiers with a permissible purpose can access secure income and employment data via third parties that are supplied directly from the source: the employers and payroll providers. Operationally, bankers gain efficiencies as this technology can help them evaluate many variables, thereby positioning bankers to more quickly make accurate and consistent lending decisions. Perhaps more importantly, automated and integrated data can help reduce the rate and number of false declines, which can negatively impact profitability and brand value.

Consider the entire loan life cycle

When evaluating growth opportunities in a changing market, bankers need a view of applicants throughout each stage of the loan life cycle, not just at application. Without this level of visibility, banks risk missing out on changes in an applicant's financial situation over time, potentially limiting the opportunity to build a deeper relationship and grow their portfolio with that customer.

As bankers continue to invest in digital transformation, they must ensure that those investments extend beyond their customer-facing applications to transform the entire experience for the positive. By leveraging technology and data analytics to improve and streamline loan decisioning, banks can set themselves apart from the competition with their efficiency and potentially put themselves in a position to provide an optimized experience to even more customers.

Gary Harvey is an experienced entrepreneurial leader in the financial services, data management, and digital marketing verticals, providing a unique perspective on how to fuse consumer behaviors, alternative data, economic trends, and corporate priorities into insightful, monetized solutions.

The vast majority of Gary's career has been with Equifax. Currently, Gary serves as Sales Director in the Consumer Finance vertical, specializing in the use of alternative data and verified income/employment solutions at many top financial institutions, insurers, brokerage firms, and telecoms.

[1] Based on assessments from Equifax Data & Analytics team, 2021

0 comments on “Without the right data, your bank could be turning away qualified borrowers”

Partner, Podcasts

‘Getting the model right’: How Regional Finance balances customer-centricity and fraud prevention in digital lending

  • In this episode of the Tearsheet Podcast, Regional Finance explores credit modeling in the digital lending landscape, focusing on the balance between serving customers and preventing fraud.
  • We speak with Chris Martin, head of product management at the $1.5 billion consumer lender, and with Argyle's Matt Gomes, who leads the firm's data and tech efforts in banking and lending.
Zachary Miller | September 21, 2023
Partner, Payments

The opportunities and evolution of the consumerization of B2B payments

  • B2B payments are slowly but surely following in the footsteps of consumer payments, becoming faster and more secure.
  • Visa, with solutions like Visa B2B Connect, is leading the way in streamlining cross-border transactions and improving efficiency, enhancing the business payment experience.
Darren Parslow, Visa | September 18, 2023
Partner, Podcasts

Navigating the future of digital banking: A conversation with Deloitte’s Nick Cowell

  • Join Nick Cowell, Deloitte Partner, as he discusses the digital banking landscape in North America and how traditional banks are adapting to meet evolving consumer demands.
  • Explore the changing dynamics of the banking industry and learn about the rise of digital neobanks, evolving customer expectations, and the critical success factors for incumbent banks in a digital-first world.
Zachary Miller | September 14, 2023

Empowering people and connecting communities through remittances

  • The remittance industry has evolved, reaching $800 billion in 2022, benefiting immigrants and their families with near real-time, transparent transactions.
  • Digital remittances, supported by Visa Direct, offer cost-efficiency and financial inclusion, but infrastructure challenges in some regions persist, highlighting the need for wider participation in building global digital networks.
Visa | September 13, 2023

Temenos: How SaaS for BaaS is putting banks back in charge

  • Many incumbent financial institutions fail to capture the BaaS opportunity, because of constraints imposed by their legacy monolithic IT architectures.
  • Temenos’ open platform for composable banking caters to an array of use cases. From product engines and financial crime, to payments and origination that enables banks or license holders to not only run their own business but also provide BaaS to brands with the same underlying platform.
Temenos | September 12, 2023
More Articles