Data network Plaid has established a new entity that will build solutions for customers who want “ready-made credit risk insights from consumer-permissioned cash flow data”.
The new entity will operate as a consumer reporting agency, according to Plaid’s head of credit Mike Saunders.
In a blog, he referred to cash flow data as “the missing puzzle piece”, with information on savings, income, or on-time rent payments “often left out of the picture, even though this data is critical to understanding someone’s ability to pay back a loan”.
Saunders said that Plaid has already built the infrastructure that makes data sharing possible.
But, he added that for cash flow data to be used broadly, it also requires “usability” – the integration of consumer-permissioned data into a decision model – and that “cleansed data alone often isn’t enough”.
“At scale, cash flow data is hard to make sense of. Many lenders simply don’t have the time, money, or technical resources to develop insights on top of this detailed, transaction-level data by themselves.”
Saunders wrote: “Plaid has formed this new entity to tackle the usability problem head-on. It enables a future where customers can get actionable and differentiated cash flow insights from Open Banking transactions data to better predict a borrower’s ability to pay.
“However far along our customers are in their digital journeys, we will have a full suite of credit solutions to meet their needs.”
“Putting cash flow insights to work unlocks opportunities for lenders to grow their business while managing risk,” Saunders added. “This fosters inclusion, expands credit access, and serves a broader set of consumer needs.”
Plaid revealed it is currently offering these new solutions in a limited release through the consumer reporting company, while also continuing to offer its current credit solutions.
Last month, Plaid teamed up with US-based Fiserv to enable data sharing through APIs, so that consumers and financial institutions can access their financial information.
Global fintech platform Adyen has also partnered with Plaid recently, to launch its Pay by Bank services in North America in early 2024.