TheMReport

22 | TH E M R EP O RT FEATURE The Power of Permission How can lenders use consumer-permissioned data to set the stage for a more inclusive lending industry? By Steve Smith I t's a new age in lending. As in many industries, we're seeing the impact of digital disruption. Slow, cumbersome access to data that wasn't always accurate is now giving way to consumers who are empowered to control the use of their financial data faster than ever before. Greater data access and control for consumers has been a major movement across the globe. There are organizations and regulations that facilitate data sharing, privacy, and security, and in some regions of the world, the way companies handle data can have significant financial implications. The best example of this is the general data protection regulation (GDPR) in the European Union, which is designed to protect the privacy of consumers by imposing fines for non-compliance that can total up to 20 million euros (nearly $23 million), or 4% of an organization's worldwide annual revenue. Consumers First W hatever the model for a region, country, or com- pany, consumers have come to expect increased control over their data along with greater benefit from its use. Organizations eager to succeed in this new environ- ment should look to digitize cus- tomer engagement and to do so in a way that not only improves processes but also enhances the experience for all involved. One way to facilitate such an approach is through consumer- permissioned data. Allowing customers to share their data—and asking for their permission when doing so with a third party— gives consumers a greater degree of control and knowledge over how their financial data is used. Organizations that begin using consumer-permissioned data con - sciously place the consumer at the forefront of any transaction, giving them expanded power over their financial health. If you're looking for even more incentive to start empowering consumers, consider some of the challenges they face. According to the Consumer Financial Protection Bureau, 45 million Americans don't have a credit score. Even those who are lucky enough to boast a solid credit history may fall just short of qualification standards. The result? An uneven playing field for credit-invisible consumers. Lenders can open up access to credit for larger purchases such as cars and homes by paving the way for consumer-permissioned data and opt-in credit scores. Capable of providing borrowers the chance to browse and share more than just a credit score, consumer-permissioned data can ensure every piece of relevant in- formation is considered through- out the credit-decisioning process. While the emerging credit scores are not used in mortgage lending, they demonstrate the impact of bringing the consumer into the decisioning process. Potential borrowers that would traditionally fall short of qualifying for a loan can rely on consumer- permissioned data to provide a closer look at their financial health and ultimately improve their chances of obtaining a loan. Beyond providing consum - ers more of a say in the lending process, offering consideration to consumer-permissioned data can also increase inclusion throughout the credit economy and even bring organizations extra business with those consumers who are willing and capable of managing a loan. Creating Opportunities T he American Dream is often defined by big-ticket purchas- es. According to a MassMutual study, three out of four consumers say they associate the American Dream with homeownership. Unfortunately for consumers whose financial status isn't readily visible, the dream isn't always within reach. Heavy emphasis on a limited set of data throughout the lending industry can create the illusion of poor financial health. A closer look at expanded financial data, however, provides a better understanding of consum- ers' capacity to take advantage of borrowing opportunities. With the emergence of consumer-permissioned data, we are able to set the stage for a more inclusive lending industry. While credit history will always be a core piece of the credit decision - ing process, there's more to a consumer's financial well-being. Instead of considering a limited set of information, lenders begin to work with more robust data sets that are designed to provide greater insight into a borrower's ability to pay back a loan. Slowly but surely, we are moving to a model across the lending landscape that will include data that is available in a consumer's day-to-day financial transactions. From cell phone plans to utility payments, there's a wide range of data points that may be considered. The boost in visibility that promises to ac - company such data can go a long way toward highlighting potential borrowers who may not have otherwise been considered. One of the more beneficial

• Cover