Key Insights: Building a Data Access & Analytics Strategy

As lenders prepare for a post-1033 era, the challenges of boosting coverage, improving uptime, and ensuring exceptional analytics with bank-grade compliance are at the forefront of credit strategy discussions. In a recent webinar, experts from PayPal and Nova Credit shared critical insights on operationalizing cash flow underwriting in the open banking era shared with moderator, Alex Johnson, Co-founder of Fintech Takes.

The potential impact is significant. "Depending on where you play in the credit spectrum, you're talking about taking up to a third of your declines and converting them at the same marginal bad rate as your bureau cutoff. That's amazing. That's incredible," noted Rich Franks, Credit Strategy Lead at PayPal.

While the opportunity is clear, many organizations still grapple with implementation. "The challenge with cash flow data is not that it's not conceptually valuable," observed Alex Johnson. "The challenge is operational - how do you do it?"

Three key themes emerged from the conversation:

Infrastructure and Reliability

Managing multiple data sources requires a sophisticated platform approach that can handle various connection types while maintaining consistent performance. "The stability of any given connection and the way it is architected is far too messy to operate and actually construct a scalable product around on a one-off basis," explained Chris Hansen of Nova Credit. Success requires establishing relationships with multiple providers to ensure reliable data access, often through a platform approach with a partner like Nova Credit.

Data Standardization and Analytics

The industry faces ongoing challenges in cleaning and standardizing data across different sources. Franks drew an illuminating parallel to the credit bureau ecosystem: "Think about how bureau data comes to be - banks provide data to bureaus in a very standardized format." With cash flow data, this standardization doesn't yet exist, as data from different banks and connections varies significantly.

The solution likely mirrors the credit bureau industry's evolution. "Where I imagine the world going is that there have to be a few providers... It probably ends up being somewhat oligopoly-like of attributization of the cash flow data," Franks predicted. Both experts agreed that while organizations might be tempted to build their own data standardization infrastructure, partnering with specialized providers who maintain and update these systems at scale often proves more efficient.

Journey Design and Consumer Experience

Chris Hansen highlighted the importance of thoughtful journey design when implementing consumer-permissioned data solutions, reframing traditional "friction points" as opportunities for trust-building with consumers. "At Nova Credit, we spend an immense amount of time with lenders and digital acquisition teams talking through the step-by-step funnel."

The timing of these discussions is particularly relevant given recent regulatory developments. At Money 20/20, in his discussion with Alex Johnson, CFPB Director Rohit Chopra emphasized the impact that open banking would have on the lending ecosystem, signaling the growing importance of cash flow underwriting in credit strategy.

For organizations looking to build out their open banking strategy, the experts recommend:

• Taking a platform approach to manage connection stability

• Designing consumer journeys with clear incentives

• Partnering with experienced providers for data standardization

Nova Credit has been designing alternative data workflows, data standardization, and embedded analytics with financial institutions for 8+ years. Reach out to us today to get started.