09 Jul The Power of Payment Instrument Data
By Adam DiVeroli & Tara Kumar
What if you had an unparalleled, full-detail view of the consumer with visibility into their bank account, including expenses and transactions? Payment instrument data provides this powerful and indispensable access, integral for decisioning, underwriting, verification, and payment processes. This live data fills the gap in credit information, instantly revealing who the consumer is today and goes a step further, revealing how they will behave in the future. Payment instrument data is derived from the transactions and attributes associated with debit cards, pre-paid cards, credit cards, bank accounts, and payment processors.
With live payment instrument data, you can:
- Eliminate fraudulent prospects.
- Authenticate account ownership, status and income.
- Discover how your prospect spends, including where they are spending and debts
- Acquire crucial data missing from credit reports, providing visibility into the last 60 days. View the income, expense and balances to date for the account, there is no gap in the history of the account.
- Generate predictive power to how a consumer will behave and determine their risk level.
Payment instrument data provides you with the power to better identify fraudulent applicants. One of the key pieces of data to verify when an applicant provides a payment instrument is its ownership. Identifying if the payment instrument is not owned by the applicants helps reduce the unnecessary defaults and payment processing expenses.
Taking it a step further, payment instrument data identifies and verifies an applicant’s income, balance, and expense trends. Income, balance, and expense trends are vital data missing from credit reports, when looking into the consumer’s last 60 days of credit history. The combination of live payment instrument data and strong predictive power can provide insight into how the consumer will behave (regarding paying bills on time) and better determine the risk associated with the loan.
How payment instrument data increases opportunities:
- Convert more business. Now you can finance people who were previously deemed unworthy based on lack of credit data.
- Offer larger amounts to better customers
- Significantly reduces overdraft fees
- Make valuable offers to customers at the right time
Payment instrument data not only helps identify risky consumers but identifies better performing consumers. It has been proven that payment instrument data can provide greater visibility into the risk associated with an applicant and allow you to finance applicants who were previously deemed unworthy based on lack of credit data. This predictive data allows you to convert denied applicants to approved customers AND gives you the ability to increase the offer amount, increasing originations and revenues.
One of the most significant benefits of live payment instrument data is its ability to reduce unnecessary overdraft fees for your borrowers. According to the Consumer Financial Protection Bureau (CFPB), consumers in the United States paid roughly $12.6 billion dollars in overdraft fees in 2011, and that rate has steadily increased (https://files.consumerfinance.gov/f/201306_cfpb_whitepaper_overdraft-practices.pdf). By verifying that the consumer has sufficient funds prior to processing a payment, helps prevent the unnecessary return fees for yourself and the consumer.
The CFPB recognizes that there is an estimate of 26 million consumers with no credit and an additional 19 million consumers with minimal credit data (https://consumerfinance.gov/about-us/newsroom/cfpb-explores-impact-alternative-data-credit-access-consumers-who-are-credit-invisible/). While payment instrument data is considered alternative data because it differs from traditional credit bureau data, it is providing credit access to underserved consumers, those lacking credit history. These consumers can now access loans and at better rates because payment instrument data utilizes metrics that looks at their entire story to determine their actual creditworthiness.