Whether it’s to attract direct deposits, or to upsell credit products in the future, creating long-lasting relationships with customers is one of the ultimate goals for any bank. Doing so requires delivering a digital-first experience, and an accurate understanding of each customer’s complete financial picture, allowing for product personalization over time.

The key to delivering this type of experience and building long-lasting relationships with your customers is live, accurate data. While credit data and historical income data can paint a partial picture of consumer financial behavior for some of the population, banks that rely too heavily on legacy data sources are missing out on crucial business opportunities. Consider those consumers who are recent immigrants, low-income workers, or even those who prefer to use cash; if reliant on those traditional data sources, your organization is missing out on a large portion of the population. There are also around 62 million consumers who have less than five credit accounts on their report resulting in a “thin” profile – consumers who could be great long-term customers for you.

Using outdated data sources that paint only a partial picture of consumers’ financial health could mean consumers will turn to your competitors, especially if those companies are able to offer products tailored to these populations. Instead, by leaning on newly accessible data sources and automation, you can open the door to assess the full financial picture of a consumer, including those who are often overlooked because of their limited credit history.

Filling in the blind spots

Tools already exist today that can help financial institutions access data that provides a complete view of a consumer’s financial situation, allowing those companies to drive more accurate credit decisions.

One of these tools is payroll connectivity, giving companies access to user-permissioned income and employment data. As a result, companies have the opportunity to build dynamic insights into a consumer’s real-time earnings and financial status instead of relying on solely legacy data sources. Using historical data in concert with projected income patterns allows you to offer products and services that best fit your customers’ needs, earning their trust and loyalty over time.

For example, banks can help consumers avoid predatory loans by offering de novo products like cash advances and earned wage access. Having a real-time understanding of a consumers' financial details significantly decreases risk since you know exactly how much a given consumer has earned in accrued wages, and which bank account those wages will be paid into. This means you can be more confident in offering a cash advance to a thin file consumer, or when helping users access wages they've already earned via earned wage access.

The potential in underwriting using alternative data

Utilizing real-time income data in addition to, or instead of, traditional data such as a consumer’s credit history or tax records allows financial institutions to look at a consumer's credit risk in a more holistic way and provide credit access to traditionally underserved markets. Using data from credible sources gives traditionally underserved applicants multiple ways to demonstrate creditworthiness via things like timely bill payments, stable income, and responsible spending.

Some specific insights that help you gain a better snapshot of a loan applicant include:

• When, how often, and how much a given consumer is paid

• What percentage of a consumer’s income is variable vs. base

• Positive financial behavior like high investment contributions or negative ones like wage garnishments

Today, institutions can accurately gauge an individual’s income and how they manage liquidity from month to month. Combined with a consumer’s credit history, they may be able to tailor the experience offered to each consumer, extending personalized firm offers of credit based on the complete picture of a consumer’s financial situation.

Expand your market and level the playing field

The truth is that there is no one-size-fits-all solution to better serve your customers. That being said, relying on outdated data sources and models will limit your total addressable market, and drive consumers towards competitors. The key, then, is to leverage multiple data sources to gain a better understanding of a consumer’s financial situation and their credit risk. By looking at all of their income and employment sources, bill pay and banking data, and credit history, financial institutions can keep existing customers engaged and push into new segments of the market.