Recent Federal Reserve Data indicated that 61 percent of American adults don’t have $ 400 in savings to cover unforeseen expenses. This reflects a steady increase from the 2013 measure – 50% – and indicates that many Americans may need loans to deal with financial disruptions such as medical emergencies or vehicle repairs.
Faster payment services could help these consumers get much-needed funds, provided lenders can access equally quick underwriting tools. However, borrowers seeking consistency might face additional hurdles if their credit history or scores become problematic.
However, a consumer’s credit rating should not be the only factor in determining loan approval. Banks can also assess risk by checking consumers’ recent financial history for reliable income. David Evans, CEO of bank verification software provider DecisionLogic, said in a recent interview with PYMNTS that the company’s solutions allow consumers to quickly deliver data from their primary bank accounts, enabling faster loan approvals for needed payments.
Underwriting tools build the confidence of borrowers and lenders and help lenders more easily access reliable banking data that replaces credit scores. They can also provide banks and other FIs with a better idea of borrowers’ financial histories, such as how open transactions affect the available capital of account holders by “aggregating”. [data] aggregators. “
“The same person’s bank account can be different in many ways for many reasons,” Evans said. “Our challenge… is to get as complete and complete a picture of this banking data as possible to mitigate these gaps.”
Eliminate loan friction
DecisionLogic recently announced that it has exceeded 40 million clients since its launch in 2011. Its solutions aim to help FIs grant loans to qualified applicants rather than facilitate disqualifications of borrowers.
“Lenders are looking to lend money because that’s how they make money,” Evans said. “They actually like to spend money, so they look for reasons and justifications to lend to people.”
DecisionLogic’s clients are often lenders who serve subprime borrowers. These consumers often do not have credit scores for lender review and must instead provide their bank statements.
Borrowers must first be prepared to complete the loan request and friction can arise when FIs request bank histories, forcing those customers to find physical copies of their statements, and then go to establishments like Staples to print duplicates or fax documents. These problems can ultimately alienate those who are faced with short-term emergencies.
“We found by talking to lenders [that] four out of five times, a consumer [with whom] they have direct contact [and] they want to lend money to – it would probably be [qualified to lend] the money will – go away because the process has so much friction, ”Evans said.
DecisionLogic’s solutions address these issues by enabling lenders to access customer accounts in real time and transmit recent bank statements. Candidates receive links by email or text that invite them to enter their login credentials. Quick access to the account can provide FIs with the valuation data they need to initiate loans.
A complete banking picture
Receiving quick snapshots of financial history can persuade lenders to grant loans they already want to issue by alleviating concerns about potential borrower risks.
“If a person has a steady income, it’s a confidence boost,” Evans said. “Most of the time, it’s pretty straightforward. We have [people] who [were] paid for 90 days, they get paid regularly for the same amount every week or every month, and they don’t have anything really funky about their bank statements. They will probably work. “
Even the most recent customer bank statements might not provide complete financial profiles, Evans acknowledged. Consumer activities can change quickly within a day, and pending transactions may not be recorded in time to be reflected.
“In today’s real-time world, you can literally – this morning – go get a payday loan from a lender, get funds deposited into your bank account today, and your bank statement today. hui – this afternoon – would be very different from your bank statement last night, ”he said.
The faster pace means lenders need the most recent and up-to-date data sources available. DecisionLogic uses solutions from financial services technology provider Fiserv, including its AllData PFM data aggregator, to fully visualize borrowers’ financial histories. DecisionLogic also works directly with several banks, including Citi and Wells fargo, for quick access to borrower information.
Real-time data tools can give lenders clearer projections of risk, especially in an age when transactions hastily change financial statements. Evans noted that many DecisionLogic clients will perform underwriting activities just before loans begin, ensuring that clients’ bank statements have not changed significantly since their initial requests.
“Everything happens in real time [when borrowers seek access to payday or cash installment loans], “he said.” The person is online, on a website, applying for a loan. [Websites that have] integrated with DecisionLogic technology… can make the underwriting decision and finance immediately. “
This information based on data on borrowers’ financial history can benefit all parties, as cash-strapped borrowers who may not have previously required credit scores can still access the funds, and lenders do not have to. not to deny loans to financially vulnerable users who need quick fixes for unforeseen expenses.