How to Harness Income and Expense Data Quickly for Greater Efficiency

So how to get there? How to achieve speed in income verification and expense classification without compromising accuracy? And how to gain a dependable long-term view of a customer's financial health without slowing down the approval process?

The answer lies with bank transaction data. On its own, this data offers limited value. But when enriched and presented in a meaningful way, it can provide fast and accurate insights into an applicant's financial position. By leveraging bank transaction data for affordability assessments, lenders can improve efficiency while complying with responsible lending provisions and removing the risk of fraudulent bank statements.

Lenders who adopt new technologies for harnessing bank transaction data will eradicate the need for customers to manually gather and send in their financial documents – a common hurdle to successful customer acquisition. Replacing the burden of paperwork will be a user-friendly, mobile solution that increases the speed of approval.

Reduce drop-offs and increase auto-approvals

The Equifax Affordability Solutions use data capture, categorisation and analysis to give lenders fast, effortless access to bank transaction data and the story it reveals about an applicant's financial health. Through their dashboard or API integration, lenders can generate a link to send via SMS or email to the applicant's mobile device. The link opens a secure portal from which the applicant can give consent for connection with their financial institution. The customer's data is extracted, and their spending behaviours and income are verified and analysed in detail using advanced algorithms and machine learning models.

Within minutes, the lender receives a reliable and consistent analysis of the applicant's transaction history. The data is returned to the lender in an easy-to-understand format, ready for integration into their existing credit assessment workflow. Or depending on the lender's requirements, a financial report is produced that contains a range of options, including account and income verification, standard or detailed affordability and commercial reporting.

A greater degree of auto-approval is now possible with this accurate and consistent view of a customer's affordability. And with fewer applications requiring manual reviews, lenders can move one step closer to the streamlined and simplified approach of straight-through processing.

Fast results based on relevant insights means less risk that borrowers will drop off and more opportunity for lenders to offer the rights products at the right time.

Here are three things to look for when choosing the right affordability solution to assess income and expense data efficiently.

1. Expense categorisation that makes sense

Be sure to test how well your affordability solution can categorise expenses. When it comes to making an informed decision about an applicant's spending habits, expense transactions must be classified in a meaningful way. If the expense analysis model is not up to the task, it will dump considerable expenses into an 'other' category when it can't ascertain where the money was spent.

The data modelling in the Equifax Affordability Solutions facilitates enriched, granular insights, removing the need for an 'other' bucket. Our market-leading accuracy in categorising data provides the support lenders need to make critical decisions on loan applications.

2. Affordability calculations that suit your needs

Also, look for a solution that supports your credit policies. For example, perhaps you want to use uncommitted income to measure how well an applicant can service their debt? In which case, your solution needs to contain all the relevant decision points that are required to support this specific affordability calculation, from multiple income sources and credit card limits to renting and living expenses.

The Equifax Affordability Solutions use 500 plus decision points to enable a consistent, long term view of how an applicant makes and spends their money, plus any signals of risk. Decision point examples include the percentage of salary withdrawn on payday, changes to income over time, the use of high-cost finance and the existence of coronavirus supplement payments.

By automatically settling most of the assessment criteria before a credit assessment, a lender can make fast, and more dependable decisions aligned with their customers' risk and financial vulnerability.

3. Broad coverage to enable a full picture

Another issue to be aware of is whether the affordability solution has broad coverage across financial and government institutions. Critical to understanding the full picture of an applicant is the disclosure of their income, expenses, assets and liabilities across multiple sources. You should be able to know the answer to questions like: have all the dependants been disclosed? Are benefit payments being made and received, and what type of benefit payment is it?

One of the advantages of Equifax Affordability Solutions is they connect with an extensive range of Trans-Tasman banks, mutuals, credit unions, building societies, non-bank lenders as well as WINZ. 

Our solutions can be quickly customised to meet individual lender needs. Talk to us today to find out more about how to harness income and expense data for greater efficiency.