Market Pulse: Consumer-Permissioned Data

Consumers are eager to make up for lost time as they depart for their summer vacations and settle back into their traditions. But with inflation, supply chain delays, global conflict, the end of COVID relief packages, and a potential forthcoming recession, what is the impact on consumer wallets during this travel season and beyond?

We asked David Fieldhouse, Director of Consumer Credit Analytics at Moody's Analytics, and Jeff Hollander, credit practice manager at Envestnet | Yodlee to weigh in during episode 13 of our Market Pulse podcast.

Consumers Feel the Squeeze from Inflation

In the last year, incomes have not kept up with inflation, Fieldhouse said. In fact, after-tax income has grown only in two months of the last year.

“In the data we have, we're definitely seeing consumers feeling the squeeze from inflation,” he said. “The impact is significant. The average household is going to pay about $317 more to buy the same stuff this year as they bought last year.”

There is good news though. Fieldhouse said inflation is showing signs of peaking. He sees moderation coming from energy prices, yet other components like food and beverages are propping up inflation.

Inflation Hits Some Populations Harder 

The basket of goods that different populations consume varies, Fieldhouse explained, that is why prices are rising differently for each group.

“We're concerned about the uneven rise in inflation rates,” he said. “Middle- and lower-income individuals typically have to spend more money on food and energy related products, and that causes their inflation rate to jump higher.”

Gen Z is experiencing higher inflation than other age groups because they spend more on gasoline. 

Listen to our Market Pulse podcast for the complete interview.

Opening Opportunities for Credit Access 

I posed the question to Hollander about how Envestnet | Yodlee can help the underserved credit market in times like these. Envestnet | Yodlee is the oldest and biggest data aggregator of consumer-permissioned bank and credit card data.

Hollander said the space is ripe for using consumer-permissioned bank data.

“If a consumer opts in, their data can be used for certain functions like personal financial management, facilitating payment to payment functionality or credit decisioning,” he explained. 

The data aggregation process has the potential to open credit services to approximately 125 million potential people, Hollander said. 

“Lenders today want to approve more loans, but they have to do it intelligently,” he said. “And using this customer-permission data, I think is the best way to go right now.”

Customer-permissioned bank data shows another side of consumer behavior.

“Traditional credit bureaus are great at showing intent to pay, but aggregated bank data like how you handle your finances and your bank account show your ability to pay,” Hollander explained. “What's your monthly cash flow? How much do you have left over every month? How are you handling all those different types of bills? Do you have more than one source of income? And particularly during COVID a lot of people are doing the gig economies. So, they might have three jobs, and you can capture all that from a bank account aggregation process.”

The Role of a Financial Services Provider

What does the future of consumer-permissioned data look like? Hollander said it has a way to go before it’s widely used. Financial services providers need to have a good strategy for deploying these solutions to the consumer.

“Who’s applying? You must suggest it at the right time in the process. You have to wordsmith it properly to get them excited about putting in their banking credentials,” he said. “A financial services provider has to think through the entire user experience to get them to click and say ‘yes.’”

For more on this interview or to listen to our other Market Pulse episodes, our website or you can find us wherever you listen to podcasts.

And don’t forget to check out our Data Dialogues podcast for conversations about delivering data-driven presentations, understanding cryptocurrencies and the lure of challenger banks.