Cash Flow Data Is Going Mainstream*

A note from Plaid:

Over the past several years, one thing has become increasingly clear in the lending sector: Cash flow data is here to stay. In addition to the growing number of digital lenders who have integrated it into their underwriting models, so have more traditional institutions such as Freddie Mac.

That’s because cash flow data has been shown to paint a more complete picture of a loan applicant’s true financial situation, particularly when used alongside traditional credit bureau data. More than ever in this challenging macroeconomic environment, having real-time cash flow data can meaningfully change the trajectory of a loan-decision outcome.

In fact, in July 2023, the Consumer Financial Protection Bureau (CFPB) released a study suggesting credit scores paired with cash flow data were more likely to predict serious loan delinquency than those without, thus improving the accuracy of the traditional underwriting model. The analysis was found to be “consistent with other reports,” demonstrating the “more stable effects” of its usage.

Despite this, many still wonder if the lending industry as a whole is ready to make cash flow data a standard piece of the loan equation, as well as how comfortable loan applicants are with sharing this data in the first place.

To find out—and better understand the headwinds and opportunities within the industry more broadly, Plaid partnered with independent market research agencies Ipsos and Opinium, who surveyed US lenders and applicants, respectively.

This report presents their findings and takes a closer look at applicant expectations, lender needs, and what this all means for the ecosystem as we enter 2024.

Key takeaways

• Cash flow data is going mainstream, as lenders embrace new data sources to navigate the realities of the credit ecosystem.

• Consumers agree: Cash flow data is a key part of the financial profile they wish to share with lenders.

• Clear opportunities exist to increase efficiency and competitiveness for both lenders and loan applicants.

• 83% of lenders say they’re open to using new types of data, the majority of which are cash flow related.

Get the report

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