June 15, 2023

Moving beyond alternative data — cash flow underwriting becomes industry standard

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Michelle Boros
Product Lead, Plaid

Michelle innovates products used by companies like SoFi, Mission Lane, BMG Money, and Better to accelerate the lending and consumer decisioning process.

Today, we’re excited to announce a new way for lenders to access real-time cash flow data, through Plaid’s new hosted Link solution. Lenders can now more easily embed Plaid Link into their user journey so that they can start using cash flow data in underwriting. With cash flow underwriting becoming the industry standard, our goal is to make it as easy as possible for lenders to access real-time cash flow data through Plaid

Alternative data on the rise for consumers and lenders

But before we get to that, let’s talk about why that data is important. Traditionally, loan applications have considered consumers’ credit scores and existing debt. But what that doesn’t take into account is the over 62 million Americans with thin credit files or no credit history at all, while other factors that could potentially boost their chances for access to credit, like consistent on-time bill payments or income, may not be weighed as heavily. 

That’s why many leading digital-first financial services companies, from SoFi to LendingPoint, are using Plaid to make it easy for consumers to share the full picture of their assets and income, creating more insightful credit decisioning processes. 

And consumers are willing to share this data for better lending decisions. According to our research with Opinium, 78% of consumers are comfortable sharing bank statements [1]. Another 76% are comfortable sharing rent/utility payment history, and 73% are comfortable sharing their savings and investment account information.

Rising interest rates and inflation have made deeper consumer visibility more important than ever. So it’s no surprise that 83% of traditional lenders are very open to using cash flow data, like bank account balance and transaction history, to modernize loan offerings, according to our recent survey with Ipsos [2]. 

Embed alternative data in your underwriting workflows

Historically, lenders had to build an entire front-end application to use Plaid’s credit products. Now, with our fully hosted, on-demand Plaid Link experience, lenders can access consumer-permissioned cash flow data through Plaid during their underwriting process. 

This new Link experience can be helpful for lenders managing both their digital and online presence. For example, support agents can use this to help their customers with verification during live chat. Lenders can now text or email their consumers a URL that allows them to connect their financial accounts and share their income and assets information directly from their bank account or payroll provider. 

For lenders, this new hosted solution is easier for your customers and allows you to connect to Plaid with minimal engineering work.

“Plaid has enabled a valuable new perspective into the cash flows of our small business loan applicants and borrowers. We’re excited about Plaid’s hosted Link experience because it provides us a new path for small business owners to opt in, ensuring we get this multidimensional understanding of as many small businesses as possible, and that our entrepreneurs get the convenience they need.”

- Nicole Van Der Tuin, Chief Analytics Officer at Accion Opportunity Fund

Getting the information is one thing, but understanding consumers beyond their credit scores is another. For customers that are looking for credit insights out of the box, we recently partnered with Prism Data who helps analyze data from connected accounts to offer smarter credit decisions through tools like its CashScore™ and Insights products. That means, no matter what your current underwriting process is, our flexible solutions can help you embed alternative data to supercharge loan outcomes for consumers. 

Better credit options for everyone 

Not only is Plaid making its products easier to use, we’re also working with industry organizations to help lenders make use of alternative data. We’ve recently partnered with Credit Builders Alliance (CBA), and its network of 600+ nonprofits, on a pilot program to help lenders access alternative data and provide consumers with better credit options. 

“We're excited about partnering with Plaid to help bring digital cash-flow data to our members. For years, CBA’s nonprofit members have been focused on boosting access to mainstream financial services for individuals with poor or no credit. Now, Plaid has made it easier for CBA members to do this by allowing individuals to connect their bank accounts and income sources via text to share highly relevant data on their financial lives. We're excited to supplement traditional credit score data with this new data to allow our nonprofit lender members to better understand their participants and underwrite more loans.”

- Dara Duguay, CEO, Credit Builders Alliance

For many families, credit options could mean the difference between qualifying for a mortgage or being able to make ends meet. Our work with CBA will give their members an even fuller financial picture, helping more people access affordable credit. 

Get started today

We’re excited to expand our credit product suite so that more lenders of all sizes can offer their users with digital solutions that meet their needs. To learn more about how you can take advantage of Plaid’s lending solutions, visit our products here.

  1. Plaid-commissioned survey through Opinium conducted on March 15 – 23, 2023 for purpose of understanding consumer lending sentiment.

  2. Plaid-commissioned survey through Ipsos conducted on December 7 – 15, 2022 for purpose of understanding lender sentiment.