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Plaid intros cash flow data-based credit report

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Jun 4, 2024
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Illustration: Sarah Grillo/Axios

Plaid is expanding its product suite with the launch of a credit report that gives lenders insights into consumer cash flows.

Why it matters: Cash flow data can be used to underwrite credit products for consumers overlooked by more traditional rating systems.

The big picture: According to one study, about 20% of U.S. adults don't have conventional credit scores.

  • That includes 28 million who have no file at the credit bureaus (probably because they've never used credit before) and another 21 million so-called "thin file" consumers who are unscorable.
  • Another 57 million Americans have scores that classify them as subprime, which some lenders won't lend to at all, while other lenders will extend credit only at extremely high interest rates.

How it works: Plaid's new Consumer Report product uses its connectivity capabilities to give lenders access to up to 24 months of bank account data, including categorized inflows, outflows and balance trends.

  • It also provides debt-to-income calculations, income verification and default risk predictions calculated using bank transaction data.

Context: The company launched a consumer reporting agency (CRA) last fall with plans to offer consumer-permissioned cash flow data to lenders looking to augment their underwriting models.

  • Plaid has worked with digital upstarts like Oportun and Mission Lane for several years to provide income verification data, but Plaid credit lead Jonathan Gurwitz says it's getting attention from more traditional lenders.
  • "We're seeing interest from large banks, we're seeing interest from large auto lenders, and we're seeing interest from companies that are making decisions at the point of sale," he says.

Between the lines: Lenders believe they can expand their loan books by expanding access to borrowers they previously wouldn't serve.

  • "We've typically seen situations where our customers can grow their portfolios without adding incremental risk by inserting cash flow information, finding more qualified borrowers on the order of 5% to 15%," Gurwitz says.

State of play: Plaid isn't alone in offering consumer cash flow data as part of its lender underwriting toolkit.

  • Last month, both Experian and VantageScore added open banking and cash flow insights into the data they shared with lenders.
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