How Lenders Can Take Advantage of Open Banking

Open banking is a financial services model that allows third-party providers to access a consumer's bank transaction data with their permission. The Consumer Financial Protection Bureau expects to finalize its Personal Financial Data Rights rule this fall, making open banking a reality in the U.S. When that happens, lenders will gain increased access to new and unique data that can provide more granular insight into how borrowers make, save, and spend their money over time.

Cash flow underwriting, previously too time-consuming and expensive for most credit decisions, can now be performed efficiently and automatically with bank transaction data. 

Analysis of bank transaction data adds a new level of predictive insight that lenders can use to approve more applicants and avoid unintended risk. It can also be used to serve new consumers entirely, like the 76+ million consumers that are thin-file or credit invisible. 

But gaining access to bank transaction data is only half the battle. Using automated cash flow underwriting in an effective and compliant manner requires data processing capabilities, feature extraction, predictive modeling, and know-how that some lenders may not yet possess. 

Lenders need actionable insights and scores to harness the power and potential of open banking and cash flow underwriting. 

A collaboration with Prism Data

Equifax has teamed up with Prism Data, the company behind CashScore®, to facilitate cash flow underwriting evaluations, allowing customers to preview the potential of bank transaction data. 

The Prism platform transforms bank transaction data from various sources —including major data aggregators as well as deposit data from core banking systems—into insights and scores lenders can use to make better credit decisions. The platform also provides access to thousands of trended attributes covering income, spending, expenses, obligations and more, including information about gig work, rental payments, buy-now-pay-later usage, and other financial activity. 

CashScore—Prism’s flagship cash flow underwriting score—reflects sophisticated cash flow underwriting as a simple, three-digit assessment of risk based on bank transaction data. It provides predictive power across the credit spectrum from subprime to super-prime, and can be used in virtually any asset class from credit cards to mortgages. The score can be used to approve or decline credit applications similarly to a traditional credit score, with adverse action reason codes provided. 

Prism's cash flow underwriting solutions are used to help expand access to credit, reduce credit and fraud risk, improve decision-making, and power new product opportunities for large banks and fast-growing fintechs. 

 An expanding arsenal of differentiated data and cash flow underwriting products

As any lender knows, more data drives better decisions. With open banking on the near horizon, lenders have access to more data than ever before. Equifax can help translate that data into deeper insights and more informed decisions that drive exceptional business outcomes.  
Contact us to learn how you can set up a CashScore evaluation.