Mastercard Enhances Open Banking for Lending Program to Expand Financial Access

Mastercard has announced enhancements to its Open Banking for Lending program, in collaboration with Argyle, aimed at simplifying the lending process and empowering consumers with greater control over their financial lives. The program now offers new features that enable income and employment verification for an estimated 95 percent of the U.S. workforce, ultimately driving smarter and more inclusive lending decisions and bringing more individuals into the digital economy.

Streamlining Income and Employment Verification

Securing a loan can be a daunting task, particularly for the 19 percent of individuals who fall outside the traditional credit reporting system. These individuals often struggle to access credit cards, secure loans, or even rent apartments due to insufficient credit history. However, digitization offers a potential solution. A recent Mastercard survey revealed that 90 percent of consumers lacking sufficient credit history are willing to provide secure digital access to their financial accounts to qualify for a loan.

Despite this willingness, the current processes for income and employment verification remain manual and cumbersome. Applicants often find themselves burdened with gathering paystubs and tax documents, while financial institutions must expend resources to verify this information. These challenges can lead to higher abandonment rates, particularly among gig economy workers and those without steady income streams.

To address these issues, Mastercard is expanding its Verification of Income and Employment solution to include credentialed payroll, powered by Argyle, a payroll data aggregator. This enhancement allows financial institutions to digitally verify an applicant’s income and employment with greater ease and accuracy. Through a single integration with Mastercard’s Open Banking platform, lenders can now verify income and employment data either through connected bank accounts or directly via payroll systems, with the applicant’s consent. This digital process eliminates the need for manual document collection, making the lending process more efficient and user-friendly for both lenders and applicants.

Expanding Pathways to Creditworthiness

Mastercard’s Open Banking platform leverages consumer-permissioned data sources, including income and employment verification, assets, cash flow, and balance analytics, to create new pathways for lending decision-making. These comprehensive insights enable more convenient and inclusive lending experiences, particularly for individuals with thin, subprime, or no credit files.

New Tools for Securing Loans

Mastercard’s Cash Flow Analytics and Balance Analytics solutions further enhance the lending process by allowing lenders to analyze applicants’ bank account data, with their permission. These tools provide a holistic view of an individual’s financial health by examining cash flow trends and account balances, offering new avenues for assessing creditworthiness and securing loans.

For small business owners, these analytics can be particularly valuable, providing lenders with the insights needed to improve financial experiences. Additionally, Mastercard’s open banking technology can utilize rent payment history to demonstrate creditworthiness, offering new opportunities for first-time homebuyers with limited credit history but strong rent payment records. This initiative is supported by collaborations with Fannie Mae and Freddie Mac to incorporate rent history and cash flow data into the mortgage underwriting process, enabling a more comprehensive credit assessment for applicants with thin or no credit files.

This article, "Mastercard Enhances Open Banking for Lending Program to Expand Financial Access" was first published on Small Business Trends