Monday, June 24, 2019

Steve Smith of Finicity on Consumer-Permissioned Data

By MBA Insights Staff
June 10, 2019

Steve Smith

SteveSmithSteve Smith is Chairman, CEO and co-founder of Finicity, Salt Lake City, Utah, a financial data aggregator and insight provider enabling innovation in financial services through access to customer-permissioned financial data. In 2018 he was honored with the HousingWire Vanguard award, which recognize the top business leaders contributing to the growth of the housing finance industry and its various sectors.

MBA INSIGHTS: What is consumer-permissioned data and why is it important?

STEVE SMITH, FINICITY: Consumer-permissioned data is a process by which individuals, families and organizations can permission the use of the data from their financial accounts. Consumer-permissioned data empowers consumers to use that financial data to their benefit, leveraging a variety of apps and services that allows them to understand and manage their financial lives.

At Finicity we believe consumers should have easy and secure access to their data and be able to share it with whoever--services providers--they want to improve their financial fitness. This data is the best source for a complete and real-time view into an account holders finances.

As a result, it's crucial for companies to embrace the idea of consumer-permissioned data and leverage it to innovate the experiences they're providing their customers. Consumer-permissioned data is the start to a more modern era of the financial industry and an integral part of its continued evolution.

INSIGHTS: How is consumer-permissioned data used in the mortgage industry?

SMITH: One area within the mortgage industry leveraging consumer-permissioned data to improve the experience and the bottom line is digitization of the verification process. We're engaging with lenders that are looking to digitally speed up the application process and eliminate the paper chase through services like verification of income and assets. With consumer-permissioned data, borrowers are empowered to permission use of their data to generate a verification report. This has dramatically simplified the process, while increasing accuracy and speed and improving the overall experience for the borrower and the loan officer.

INSIGHTS: How can lenders, servicers and fintechs balance the benefits of consumer-permissioned data while protecting against fraud and cybersecurity concerns?

SMITH: Consumer-permissioned data actually reduces fraud, as the data is pulled directly from the source, whether it's a bank or otherwise. Obtaining the same data through other methods such as email, fax or snail mail is much less secure and offers more opportunities for error or "editing." Retrieving the data directly from the financial institutions is one reason Fannie Mae and Freddie Mac offer their reps and warrants relief programs. It's a trusted source.

Digital verifications also enhance security by eliminating the inherent risks with emailing, faxing or snail mailing a document that has the same information. With a digital solution, the data is always encrypted. At an organization like Finicity, because we are entrusted with consumer personal financial data, we implement the same techniques, policies and technologies utilized at the world's largest banks to secure data. This includes being fully compliant with SOC II Type 2 and PCI certificates as well as passing regular audits from major FIs.

INSIGHTS: How will new perceptions on data control affect the future of the mortgage industry?

SMITH: Consumers' desires for more control have encouraged FIs, fintechs and other service providers to act more quickly in adapting solutions to provide greater degrees of transparency and control. We are regularly seeing new solutions roll out that provide consumers more access to their data, and enable them to make better decisions through the availability of more real-time and digestible information. In the mortgage industry specifically, we expect these new solutions and data to transform the application process into a more accurate and seamless experience where consumers are in the driver's seat. They will be more actively engaged and knowledgeable, and we see this improving their financial situation, leading to fewer defaults and late payments.

INSIGHTS: The mortgage industry is also adapting to other credit scoring models. Why is this important?

SMITH: The year the credit score was invented, gas cost $1, the Berlin Wall came down and the World Wide Web was created. It's been almost 30 years, and while the credit score has proven highly useful, it hasn't seen much change. This is for two reasons--the first is that it works well. Current credit scoring factors have proven themselves to be reliable indicators of a borrower's willingness to and capability of repaying a loan. Secondly, it's been too complicated. Incorporating different data or restructuring the process has been too technologically complex.

However, that's all changing. Technology is transforming all industries, and in this case it enables us to utilize more consumer-permissioned data to improve the credit decisioning process. This is evident in the updates to scores we recently announced with Experian and FICO called UltraFICO Score and Boost. These solutions empower borrowers by enabling them to permission use of their financial data and incorporating it into the credit scoring process. While not yet approved for mortgage loans, the scores represent a major shift in the way credit scoring is conducted.

The scores complement existing methods with other forms of data to create a richer view into the consumer, and have great potential to expand credit inclusion. This means they will be able to more accurately demonstrate a borrower's financial situation. It can be especially helpful for those fall in the 500 to 600 FICO score range or have little to no credit history at all.

INSIGHTS: How is Finicity delivering expanded data for the new Boost and UltraFICO credit scores?

SMITH: UltraFICO and Boost each utilize different aspects of expanded data. Finicity only provides the specific insights required for each scoring solution. Experian Boost looks at the regular payment of utility and phone bills in their new score, and these payments are analyzed by Finicity. The UltraFICO Score looks at the length an account has been open, recency and frequency of account transactions, evidence of consistent cash on hand and a history of a positive account balance. With permission from customers, Finicity securely accesses consumers' cash-based accounts and pulls data to be incorporated into the new score.

INSIGHTS: What underlying trends within the industry does this major change signify?

SMITH: We see these changes as the first few steps toward a future in credit decisioning that will look very different than what we are all accustomed to. We believe that decisioning will increasingly use consumer permissioned data to provide a rich and real-time view into a borrower's financial fitness. There are many data sources consumers can permission to paint a fuller picture of their financial health, or even create a score when there was none.

Additionally, we see the opt-in feature as a great advance for increasing consumer control. In the coming years, we expect that control will increasingly reside with the consumers and they will be able to grant permission for companies and lenders to view their scores, and will choose who has access.

While consumers may own their data, it's still necessary to have an impartial third-party validate and generate the scores and ensure accuracy. Scores will certainly be here to stay, but what the process looks like will be very different.

INSIGHTS: The scores are not yet available in the mortgage lending space; what future do you think they have here?

SMITH: The new scores provide a more accurate and real-time model through new consumer-permissioned data sources and increase financial inclusion for millions of Americans. They will soon represent the gold standard for modern scoring, and we believe they will be used in the mortgage lending space once they have proven themselves in other areas.

INSIGHTS: How will the scores provide value to lenders?

SMITH: With a more comprehensive understanding of the consumer's financial profile, lenders will have an opportunity to expand their lending bases, while still making responsible credit offers toborrowers that were previously invisible using traditional decisioning and scoring processes. Accenture estimates that bringing the unbanked into the formal banking sector worldwide with more inclusive services like these could generate $380 billion in new revenue for banks.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at; or Michael Tucker, editorial manager, at

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