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. This new and unique data 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 utilize bank transaction data to its fullest potential in credit underwriting. 

The Prism platform transforms bank transaction data from various sources —including open baning data from 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, savings, obligations and more, including information about buy-now-pay-later usage, gig work, rental payments, behavioral insights, and other financial activity. 

CashScore—Prism’s flagship cash flow underwriting score—reflects sophisticated cash flow underwriting as a simple, three-digit risk score 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 category of consumer and SMB lending. Prism’s CashScore has shown to be highly predictive of credit risk, and orthogonal to traditional credit scores, providing an average 30% lift in predictive performance when compared to traditional credit scores alone.¹ Using CashScore, lenders can instantly analyze deposit account activity to identify sizable populations of borrowers who are better (or worse) credit risks than their credit histories alone suggest. The score can be used to approve or decline credit applications similarly to a traditional credit score, with specific and explainable 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 lenders of all types, from large banks and credit unions to small financial institutions, non-bank lenders, and fast-growing fintechs. Lenders can now purchase the CashScore and Prism's advanced insights attributed directly from Equifax.

 An expanding arsenal of differentiated data and cash flow underwriting products

As any lender knows, more data drives better decisions. With open banking now increasingly common within the financial landscape, lenders have access to more data than ever before. Equifax can help translate deposit transaction 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.

Source: 

1.   Based on Prism’s analysis when CashScore is compared to traditional credit scores across a wide range of client portfolios. Predictability based on KS