April 30, 2025
How Plaid transforms the full lending lifecycle with cash flow insights
Traditional credit bureau data is still a crucial tool for risk assessment, but its limitations (especially for underserved consumers) have become more apparent, making cash flow data and insights a game-changer for lenders. By integrating cash flow data and insights into the lending process, lenders can get a more complete and real-time picture of their borrowers’ financial stability, allowing them to approve more borrowers, expand access to credit, improve decision accuracy, and enhance portfolio performance, all while reducing risk.
Signals within the lending ecosystem, including consumer sentiment, show that it's time to move into this next era of lending:¹
88% of U.S. consumer lenders are more confident using alternative credit data now compared to a year ago
74% of consumers are comfortable sharing their financial data with lenders
60% of consumer lenders feel somewhat or less confident making lending decisions solely on traditional credit data
Plaid’s solutions (available via API or no-code dashboard) help meet lender needs across key use cases and at each stage of the lending lifecycle:
Prequalification / Acquisition
Asset & Income Verification
Underwriting
Servicing
Since its launch, Plaid’s Consumer Report has helped almost 1 million borrowers use their cash flow data to qualify for loans or housing. With Consumer Report, lenders can tap into a single platform for the entire lending lifecycle, unlocking use cases from prequalification to servicing via Plaid’s open banking APIs. Read on to learn how.
1. Smarter, more inclusive acquisition and prequalification
As the first phase in the lending journey, prequalification is when lenders have access to the largest pool of potential borrowers, meaning more opportunities to find qualified borrowers, better credit risk selection to improve portfolio quality, and stronger pricing power. Plaid’s Consumer Report allows lenders to not only expand their reach to thin-file or no-file borrowers but also optimize risk-adjusted pricing and approvals for borrowers of all credit profiles.
The more up-to-date data lenders have, the better they can prequalify applicants. By analyzing income stability, spending habits, and savings trends, lenders can improve targeting for creditworthy applicants, which leads to reduced customer acquisition costs and higher conversion rates. Real-time signals like cash flow health indicators empower lenders to pre-screen potential borrowers more accurately, ensuring an efficient acquisition process.
During prequalification, minimizing friction is critical. With Layer, Plaid offers a seamless experience for consumers and lenders when it matters the most, allowing borrowers to securely share their full identity profile and connect their financial accounts in just a few taps. Lenders can streamline account linking while receiving high-trust identity information all in one step, reducing onboarding time and boosting conversion rates. Early customers are seeing up to 25% conversion improvements with Layer.
2. Instant, streamlined asset and income verification
Traditional income verification methods can be slow and cumbersome, often requiring manual document uploads, which may lead to borrower drop-off. Plaid’s credit solutions—Base Report and Income Insights—automate this process by replacing self-reported income with direct bank account transaction analysis, which reduces fraud and streamlines income and asset verification. This instant and frictionless process is particularly beneficial for gig workers, self-employed individuals, and those with multiple income sources.
The core component of Consumer Report is Base Report. It provides comprehensive bank account, cash flow, and account-holder identity data that can be used for enhanced asset verification, which is a key building block for better decisioning. This data includes:
Account Insights: Receive calculated insights derived from transaction data, such as balance averages, balance trends, and categorized inflows and outflows.
Transaction History: Get up to 24 months of consumer-permissioned bank account data, providing a more complete borrower financial picture.
Identity Information: Plaid extracts identity data from the bank account and shares it with the lender.
Primary Account Indicators: Identify the primary bank account based on transaction frequency, offering lenders more confidence that the connected account will provide an accurate picture of a borrower’s financial behavior. This helps lenders reduce the risk of making decisions based on incomplete or misleading financial information, as secondary accounts may not reflect the true financial behavior of the borrower.
The Income Insights component of Consumer Report is a powerful tool that enables lenders to more effectively assess a borrower's ability to pay. Insights include:
Detailed Income Streams: Track over a dozen categorized income streams, including salary, gig economy, retirement, unemployment, rental, and more. This detailed breakdown helps in understanding the full financial picture of the borrower.
Historical and Forecasted Income: See historical average monthly income and forecasted average monthly income. The forecasting model takes into account historical patterns, seasonality, and trends—giving lenders a clear view of past and expected income, enabling more informed lending decisions.
Gross Income Estimations: For salary income streams, Income Insights estimates gross income from net income, factoring in taxes and deductions. This is particularly useful for verifying stated income against provided documentation.
Income Stability Indicators: Prediction intervals are provided with forecasts to help evaluate the stability of a borrower’s income. A narrower interval suggests stable income, while a wider interval indicates variability, which can be typical for freelancers or gig economy workers.
Employer Details: Receive the employer name associated with income streams. This adds another layer of verification and helps in assessing the borrower’s employment status and stability.
Next Payment Date: See predictions for the next payment date for income sources with identifiable frequencies (e.g., direct deposits every two weeks). This feature is especially useful for scheduling repayments and assessing cash flow timing.
3. Faster and more accurate underwriting decisions
“Augmenting our traditional credit models with cash flow underwriting will help us reach more consumers, including people we're unable to lend to today.” - H&R Block
Plaid has built a powerful and extensive network based on hundreds of millions of connections. This enables us to deliver unique and differentiated insights that go beyond traditional credit data and can be used for cash flow underwriting.
Plaid’s real-time Cash Flow and Network Insights can enhance lenders' underwriting models with details on spending habits, discretionary cash flow, income consistency, loan stacking behaviors, app connections, and more. These comprehensive insights allow lenders to accurately assess the borrower’s ability to repay, helping them expand credit access without increasing delinquencies. Instead of relying solely on traditional credit data, lenders can leverage Plaid’s forward-looking view of a borrower’s financial health to make faster and more accurate underwriting decisions.
Plaid can help lenders manage their portfolios and risk profiles with more comprehensive data from our extensive network of connected financial accounts. Not only are we able to provide cash flow data and insights through additional components within our Consumer Report solution, but we’re also able to showcase attributes and patterns from across our network that could potentially indicate credit risk or financial stability—even when traditional scores say otherwise.
Cash Flow Insights [MVP]: Cash Flow Insights offers a detailed view of a borrower's financial stability by analyzing cash flow patterns (balance averages, trends, etc) and account primacy. It enables lenders to better assess financial health and stability.
Network Insights [MVP]: Network Insights provides unique insights into the financial apps and services a borrower uses. This includes services not consistently reported to traditional credit bureaus, such as buy-now-pay-later, cash advance, and earned wage access applications. It is used to gain a broader understanding of a borrower’s creditworthiness based on connections the user makes through Plaid’s network.
Partner Insights: With Partner Insights, lenders can access Prism Data's CashScore® through the Plaid CRA API. It can be used to quickly leverage cash flow data, as it provides a single cash-flow-based score that can enable lenders to approve more applicants that would have been rejected with bureau data alone and vice versa (“swap-ins and swap-outs”).
4. Proactive loan servicing and risk monitoring
“My prediction is that competing and winning in consumer lending over the next couple of decades will require lenders to invest in creating an exceptional servicing experience for their customers.” - Alex Johnson, Fintech Takes
Using cash flow data and insights for servicing is an exciting use case that represents an untapped opportunity for lenders. Early adopters will have a lasting advantage in an increasingly competitive space. Lenders can proactively monitor borrower financial health using early warning signs detected in cash flow data.
Plaid enables lenders to stay up-to-date with borrowers' financial stability through ongoing connectivity. To refresh the data in Consumer Report as needed, lenders can simply call our APIs to get the most updated information. Lenders can persistently assess holistic portfolio risk and customer financial health.
Regular updates about changes in a borrower’s income or loan exposure can improve post-decision servicing and ongoing risk management, reducing delinquencies and charge-offs. Plaid can identify loan stacking behaviors, track income and balance trends, understand borrower spending behaviors, and recalculate LTV ratios. This allows lenders to offer personalized repayment options based on real-time financial behavior.
Getting started
Plaid’s APIs and no-code dashboards simplify integration with lenders’ existing workflows and don’t require major infrastructure changes. With consumer-permissioned data that meets regulatory standards, lenders can quickly leverage Plaid’s insights to operationalize large datasets for improved credit decisioning.
Why Choose Plaid?
Plaid offers unparalleled access to permissioned financial data, enabling lenders to connect with more borrowers seamlessly. With over 70 million people saving their information to the Plaid Network, sharing cash flow data becomes easier and faster with each application. Plaid’s solutions offer unmatched conversion and unique data and insights, ensuring smarter lending experiences for both lenders and borrowers. We’re trusted by 1 in 2 U.S. consumers with a bank account and are integrated with thousands of financial institutions to offer extensive coverage, bringing high-quality data to the lending lifecycle that drives effective risk management and profitable growth.
Lenders who adopt cash flow underwriting with Plaid’s real-time data and insights will gain a lasting competitive advantage, optimizing the entire lending lifecycle with more approvals, lower risk, and better pricing, all while ensuring a seamless borrower experience.