One of the biggest changes that have happened to the loan process over the last decade is the aggregation of consumer data for faster loan approval/decision making. The fact is, a consumer can be approved or rejected within seconds for a loan or the financing of big ticket items.
In this article from American Banker, Data Aggregation’s New Frontier: Lending Decisions, Finicity Co-Founder and Executive Vice President Nick Thomas says, "Aggregation is similar to what borrowers "have been doing for decades-just quicker." Kabbage CEO Rob Frohwein says, "I don't even know if we'd be in business had the online lender not insisted on aggregation."
Below are the first few paragraphs of the article. MoneyThumb considers this a true -must read for lenders who want to stay on the cutting edge.
Data Aggregation’s New Frontier: Lending Decisions
So long as the technology is working as intended, lenders will gain something they may have not been privy to before — years’ worth of transaction data, such as cash flows that aggregators think lenders should crunch as part of their credit analysis in addition to credit history data. And sure, banks may already count some applicants as customers and have access to their financial transactions. However, most consumers have multiple bank accounts that lenders would also need to mine.
“You have to have a full picture of a person’s finances,” said John Bird, vice president of product marketing and alliances at Envestnet-Yodlee.
For now, the practice of using data aggregation for streamlining the application process is more typical of fintech companies like Quicken’s Rocket Mortgage and Kabbage. But aggregators like Finicity and Envestnet-Yodlee predict that traditional banks will increasingly follow suit to protect their lending operations.
“Banks are definitely awake to this,” Bird said. “Quickening lending decisions is going to be the No. 1 or No. 2 thing on the minds of large banks.”
Ian Benton, an analyst in Javelin Strategy & Research’s small-business practice, said the vision for many lenders is about crunching many sources of data to provide lending offers when customers need it most.
It would be a more proactive future, in which lenders do not wait for applications but on their own find borrowers and deem them creditworthy and then initiate offers.
“Eventually, we will see the death of the loan app,” Benton said.