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April 14th 2022

Top 3 takeaways from the LendIt webinar on banking data, featuring Nova Credit, Experian, and Prosper

Sarah Davies, Chief Risk & Analytics Officer at Nova Credit, joined leaders from Experian and Prosper Marketplace on a webinar discussion to discuss a unique solution that connects high consumer scalability with high predictive risk accuracy.

The need for new credit risk solutions to enable lenders to reach more underserved consumers is higher than ever before. Recently, Sarah Davies, Chief Risk & Analytics Officer at Nova Credit, was fortunate to join leaders from Experian and Prosper Marketplace on a webinar discussion to discuss a unique solution that connects high consumer scalability with high predictive risk accuracy. 

The Lendit Fintech-hosted webinar, “Why Consumer-Permissioned Banking Data is a Game Changer for Lenders,” spanned several topics, including why consumers who are excluded from credit still exist despite underwriting innovations over the past decade, consumer-permissioned data becoming the standard way to furnish data, and the challenges that face lenders when adopting new underwriting strategies. 

There was so much to cover in the webinar, so to help we’ve compiled our top 3 takeaways here. 

#1. Cash flow-based underwriting is inevitable, and simplicity for both consumers and lenders is critical for adoption at scale

The adoption of cash flow-based underwriting is not a matter of if; it’s a matter of when. And the panel is looking forward to a future where this solution helps not only expand consumer lending, it might solve the challenge once and for all. 

“I’m going to place a big bet on bank data. I think it is the next inevitable innovation…in five years time we will have retired the term financial inclusion. “ - Sarah Davies, Chief Data & Analytics Officer, Nova Credit

The webinar panel universally agreed that the simplicity of integration while maintaining low consumer friction through a positive experience is key to the widespread adoption of cash flow-based underwriting solutions. 

“That is again something we want to work on, in terms of how to really minimize the friction, at the same time getting the right information to allow [consumers] to go through an easier path. “ Haiyan Huang, Head of Credit Risk, Prosper Marketplace

Solution providers are accountable to the industry to create new ways to responsibly expand consumer growth while fitting within the current underwriting structures that exist today. Leveraging existing infrastructures and bringing new solutions within this framework will facilitate the lowest friction path forward while reaching the maximum amount of credit risk insight for the widest consumer base possible.

#2 The industry needs to move away from legacy scoring models

The topic of why unequal access to credit was covered during the webinar and why millions of U.S. consumers are still underserved. The panelists noted that while traditional credit credit scoring models still provide valuable insights into consumer risk profile, there is a need for the industry to shift the thinking to embrace newer data and analytics solutions to achieve inclusive lending.

“There is this need or ask for lenders to pick up new tools and drive the transition from legacy score models that they may be using, because there are viable solutions out there that actually incorporate all of the different data assets and new machine learning techniques and analytics to help address that population that we’re all talking about.” Alpa Lally, VP of Data Business, Experian

The discussion went deeper but the takeaway was clear: consumer-permissioned, FCRA-compliant cash flow data is poised to be a game-changer for lenders who are looking for universe expansion. 

When used in combination with a credit score, lenders can see both the likelihood of a consumer to pay a debt as well as the ability for the consumer to pay back the debt. 

#3 The challenges for adopting cash flow data into underwriting is real

While there was a lot of productive discussion around the potential benefits of consumer-permissioned cash flow data, there were also some real challenges highlighted that lenders faced when considering how to incorporate this new data source into their underwriting models.

One notable challenge is how to intelligently sort through the noise that transaction-level banking data naturally will provide and pull out meaningful insights that predict credit risk. Consumer-bias remains a large concern among the panelists - the notion that consumers may self-select and connect only the bank accounts that illustrate positive financial behaviors while electing not to share accounts that may contain unfavorable information. 

Another challenge is understanding where and how to implement consumer-permissioning to access bank transaction data and help consumers that need it the most while providing the lowest friction experience to the entire consumer base in aggregate. Lenders and solution providers who work together to solve challenges like these stand to benefit the most.   

Click here to access the full recorded webinar to find out more exciting takeaways.

Announcing the Cash Flow Underwriting Summit: a first-of-its-kind executive summit dedicated to exploring and advancing the practice of cash flow underwriting in consumer lending.