For any lender looking to gather information, the data gathering process can be cumbersome. Digital processing allows financial institutions to streamline how data is brought into the business model and consumed by lending platform. This is of value to both the customer and the financial institution because the data can be looked at more granularly. With more details, more insights behind the details, and the ability to understand the trend of the data, there will be a deeper understanding of the customer’s financial situation. A credit score of 680 going up indicates a completely different trajectory than a credit score of 680 going down.
Terry McKeown is the practice manager for Envestnet/Yodlee. For 17 years, Yodlee has been acting as a data aggregator company for different financial institutions, mostly in the credit space. “For the first 15 years, it was used a lot for investment needs.” McKeown said. “It was used for insight in credit lending by providing additional info on assets, verification on those assets, income, employment, savings and investment accounts, and more, from a variety of data sources.”
Yodlee’s core competency is data aggregation and account verification.
Yodlee was acquired by Envestnet about a year ago. A pioneer in the industry, Yodlee has brought over 70 patents and a wide breadth of data — 15,000 different data sources including checking accounts, brokerages, 401Ks, and more — to the lending ecosystem. Seventy-five percent of the data comes through direct feed. While they have been aggregating data for years, doing so in lending is a newer side of the business. Yodlee does business currently in 16 countries.
“It’s all customer-permissioned,” McKeown said. “We are doing it on their behalf. This isn’t a traditional credit bureau process.”
The process is quite helpful in subprime. If the customer’s file is thin and unscorable, Yodlee can get additional information to provide more insight to the lender. In the prime category, it provides a more holistic view of the borrower’s financial situation, because knowing what assets they have helps in the size and type of loan. For a small business, Yodlee can pull up to a year of data.
“This gives seasonality so the lender has more insight into the health of the business over a long time period,” McKeown said.
The customer inserts their information directly into the lending portal and Envestnet/Yodlee gathers that information then provides the lender with a data file, a report, HTML view, PDF format, and multiple other formats. This streamlining helps lenders make better credit decisions because they have a comprehensive understanding of the applicant’s financial health.
“We’re providing what the industry needs,” McKeown said, “not so much what we can provide, but what the industry is asking for. We can be more timely with credit decisions and more precise with decisions to assist the lender in any format they ask for.”
Yodlee pulls data on borrowers from bank accounts (savings, CDs, money market accounts, checking accounts, business accounts, and more), investment accounts from brokerages to trusts, retirement accounts, insurance products like annuities, life insurance, auto insurance, and health, and liabilities, which includes mortgages, home equity loans, HELOC, credit cards, student loans, e-billers, and more. This means lenders can get most of their data from a single source rather than doing all the legwork themselves. This is data aggregation for the 21st century.
Written with Nicki Jacoby.