Mastercard Enhances Open Banking for Lending Program to Simplify Credit Access
Mastercard has announced significant updates to its Open Banking for Lending program, aimed at streamlining the lending process and giving consumers enhanced control over their financial futures. The program now includes new features that facilitate income and employment verification for an estimated 95 percent of the U.S. workforce, ultimately driving more inclusive lending practices and integrating more individuals into the digital economy.
Streamlining Income and Employment Verification
Obtaining a loan can be challenging, particularly for the 19 percent of individuals outside the traditional credit reporting system. These individuals often face difficulties in accessing credit cards, securing loans, or renting apartments due to lack of credit history. A recent survey indicated that 90 percent of consumers without sufficient credit history are willing to provide secure digital access to their financial accounts to qualify for loans.
However, the existing methods for income and employment verification are often manual and inefficient. Applicants typically must collect pay stubs and tax documents, while financial institutions invest considerable resources to verify these details. Such complexities can lead to increased abandonment rates, particularly among gig economy workers and those without consistent income.
To tackle these challenges, Mastercard is expanding its Verification of Income and Employment solution with enhanced payroll credentials. This improvement allows financial institutions to digitally verify an applicant’s income and employment swiftly and accurately. By integrating with Mastercard’s Open Banking platform, lenders can access income and employment data through connected bank accounts or directly from payroll systems, with the applicant’s consent. This digital approach eliminates cumbersome manual processes, simplifying the lending experience for both applicants and lenders.
Expanding Pathways to Creditworthiness
Mastercard’s Open Banking platform harnesses consumer-permissioned data sources, including income and employment verification, assets, cash flow, and balance analytics. This comprehensive data enables better lending decision-making, fostering more convenient and inclusive experiences for individuals with limited or no credit history.
New Tools for Securing Loans
The introduction of Cash Flow Analytics and Balance Analytics further refines the lending process, allowing lenders to evaluate applicants’ bank account data with permission. These tools provide a comprehensive view of an individual’s financial health by analyzing cash flow trends and account balances, creating innovative avenues for assessing creditworthiness and securing loans.
For small business owners, these analytics are particularly beneficial, equipping lenders with the insights needed to enhance financial experiences. Furthermore, Mastercard’s open banking technology can utilize rent payment history to demonstrate creditworthiness, opening new doors for first-time homebuyers with limited credit history but strong rental records. This initiative is further bolstered by collaborations to integrate rent history and cash flow data into mortgage underwriting processes, enabling a more thorough evaluation for applicants with thin or no credit files.
