Dec 16, 2024
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Cash flow underwriting is transforming how banks and lenders assess applications today. With the rise of banking transaction tools such as Plaid, Nova, MX, Chirp, and others, analyzing banking transaction data has never been more critical.
In this spotlight, we explore why cash flow underwriting has gained immense popularity among banks and fintechs and how our partner Pave is leading the way by uncovering powerful insights in this space.
How Did Access to Banking Transaction Data Become So Popular?
One of the pioneers in the banking transaction space is Yodlee, founded over 25 years ago. Yodlee revolutionized digital banking by popularizing secure bank login access. Initially, many were skeptical about consumers’ willingness to share their banking transaction information. However, over time, that mindset has shifted dramatically.
Today, some of the most widely used personal finance applications require users to log in to their bank accounts, offering deeper insights into financial health and empowering users to set actionable goals.
Since Yodlee’s inception, more players have entered the scene, and banks have developed interfaces that connect directly with intermediaries to securely share transactional data. While banks initially resisted this shift—concerned that competitors might exploit such information—government mandates in the EU and the U.S. have now forced compliance. The longstanding debate around data ownership has finally been resolved, with consumers emerging victorious.
As a result, with proper consent, banking transaction data is now more accessible than ever.
How Is Banking Transaction Data Used in Today’s Fintech Landscape?
With transactional data readily available, consumers no longer need to scan, fax, or email bank statements. This newfound freedom has paved the way for one thing: automation—and lots of it.
For example, mortgage lenders traditionally used bank statements to verify income and employment. With modern tools like Pave, verification has become instantaneous. Pave’s automation analyzes banking data with incredible accuracy and speed, eliminating the need for manual reviews of credits and debits.
Beyond mortgages, personal finance providers—like short-term lenders and Buy Now, Pay Later (BNPL) platforms—are leveraging banking transactional data to assess creditworthiness. Unlike traditional credit reports, which reflect long-term financial behavior, recent banking activity (e.g., the last 90–120 days) can offer a clearer snapshot of an applicant’s ability to repay small loans or short-term installments.
For instance, consistent paychecks and responsible spending behavior can be far more relevant to a merchant or BNPL provider than a credit history from five years ago.
How Do Banks and Lenders Consume Banking Transactional Data?
While banking transaction data is now widely available, its complexity has also grown. Banks and fintechs categorize transactions differently, and without industry standards, analyzing this data can be challenging—especially when pulling information from multiple sources.
This is where Pave shines. Pave excels at standardizing seemingly fragmented banking transaction data, transforming it into clear, time-series attributes that are easy to analyze. Using LendAPI’s intuitive visual rules builder, you can quickly incorporate Pave’s insights into highly complex cash flow underwriting rules—seamlessly integrating them into your onboarding processes.
Getting Started with Pave and LendAPI
If you’re already familiar with Pave, you’ll be excited to know that all of Pave’s attributes and scores are now available within LendAPI. You can build your rules and models, then activate them with a simple API call.
To get started:
Sign up at LendAPI.com.
Enter your Pave credentials in the Integrated Partners section under Settings.
Start building and deploying your cash flow underwriting models today with Pave and LendAPI.
Join us in embracing the future of underwriting—faster, smarter, and more insightful than ever.
About Pave
Pave is a leading provider of AI-powered cashflow analytics and scoring solutions designed to enhance consumer and small-to-medium business (SMB) credit risk assessment. By analyzing real-time cashflow data, Pave enables lenders to identify creditworthy, underserved borrowers, thereby increasing approval rates and improving on-time payments. Their suite of products includes Cashflow Analytics, Cashflow Scores, and Cashflow Attributes, all tailored to integrate seamlessly into proprietary risk models. Serving a diverse clientele—including banks, credit unions, fintech companies, and debt capital providers—Pave's innovative approach empowers financial institutions to make informed lending decisions, optimize credit offerings, and drive sustainable growth. Please visit www.pavefi.com
About LendAPI
LendAPI is the premier digital onboarding platform for banks, offering an integrated suite of tools including Product Studio, Rules Studio, Pricing Engine, Integration Marketplace, and Variable Studio. These tools work seamlessly together, enabling banks and fintechs to launch products with just a few clicks.
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