Mastercard (NYSE: MA) is enhancing its Open Banking for Lending program, delivered with Argyle, to streamline the lending process and give consumers more agency over their financial lives.
With new features, Mastercard has the ability to “provide income and employment coverage to the estimated 95 percent of the U.S. workforce who receive payments via direct deposit, ultimately powering smarter and more inclusive lending decisions and helping bring more people into the digital economy.”
Securing a loan can be overwhelming, and the challenges “are compounded for the 19 percent of individuals who fall outside of the traditional credit reporting system and therefore face difficulty opening a credit card or renting an apartment.”
Digitization could make a difference; a recent Mastercard survey of lending trends shows 90 percent of consumers who “do not have sufficient credit history to qualify for a loan are willing to grant secure digital access to their financial accounts to obtain one.”
While consumers are open to connecting their accounts “for faster experiences, income and employment verification processes today are manual and can be viewed as laborious. Applicants may waste time and energy gathering paystubs and tax documents while financial institutions expend their resources verifying them.”
As a result, consumers are more likely to “abandon the process completely, and those without steady income streams, including members of the gig economy, face additional challenges in disclosing their payment history.”
Mastercard is expanding its Verification of Income and Employment solution to include credentialed payroll, powered “by payroll data aggregator Argyle, enabling financial institutions to digitally and seamlessly verify an applicant’s income and employment.”
Through a single integration to Mastercard’s Open Banking platform, lenders have “the flexibility to verify income and employment data through connected bank accounts or via payroll systems with the applicant’s permission.”
Mitigating the need to collect income documentation and manually review data, the new solution renders “an efficient and convenient process for lenders and applicants.”
Brian Geary, Chief Operating Officer at Argyle, said:
“We’re excited to make digital verification of income and employment widely available through Mastercard Open Banking, balancing our shared priorities of trust and innovation. These solutions empower all parties to take advantage of frictionless lending experiences and achieve faster and more accurate verification.”
Open banking expands pathways to lending decisioning by “harnessing comprehensive insights from consumer-permissioned data sources, including income and employment verification, assets, cash flow and balance analytics.”
Not only does this enable easier and more convenient experiences, but it also “opens more opportunities for individuals with thin, subprime or no credit files.”
Additionally, Mastercard’s Cash Flow Analytics and Balance Analytics solutions “enable lenders to use – with an applicant’s permission – their bank account data to holistically view their financial health during the decisioning process.”
These solutions indicate creditworthiness by “analyzing cashflow trends as well as account balances in an individual’s bank account, creating new pathways to obtain credit and secure a loan.”
For small business owners that give their permission via open banking, lenders “can also leverage Mastercard’s APIs to apply those same analytics and insights to improve their financial experiences.”
Mastercard’s open banking technology can also “use rent payment history to prove creditworthiness, creating opportunities for home ownership for first-time homebuyers who may have limited credit history but boast strong rent payment history.”
Mastercard works with Fannie Mae and Freddie Mac to “provide rent history and cash flow assessment data during the mortgage underwriting process, powering a more comprehensive credit assessment for thin-file and no-file applicants.”