For much of the past decade, open banking has been a buzzword tossed around by opinion leaders, pundits, and a few of my smarter friends. I'll admit that I didn't have more than a third-grader's understanding of open banking until I met the EDGE team and started ideating with them on what we could build and bring to credit unions.

I've been serving credit unions for over three decades and until now every arrow in my quiver has been more external data and technology - the latest bureau bell or whistle, a better LOS, new risk models. Remember the first time you heard about AI? Since we sent the first real-time credit report at TransUnion, I've heard one lingering question from every credit union: "Thanks for the shiny object, but can you do anything with the ocean of data that I already have on my members?"

My answer was always "not exactly" but with the advent of cashflow underwriting and proven analytics built here at EDGE, I'm proud to say "Yes!"

This blog post is to not only tell you how we're breaking ground by making credit unions' data work for them but also to help with concerns about sharing that data because open banking has been working in one direction for most credit unions – outbound and not inbound to improve your own member care.

You're already sharing your data

It turns out that most credit unions have enabled their members to share data for decades through platforms like Finicity (see here and below), and even without your knowledge members have provided their data to other fintechs. Since early days of the internet, data aggregators like Yodlee and Plaid have connected to nearly every U.S. bank, credit union, and other financial institutions with screen scraping.

Your members provide their username and password to the aggregator who, in turn, deploys scripts that login through your online banking portal then crawl through the member's account in order to extract balances, transaction detail, personal information, and more.

This isn't as sinister as it sounds – everything is done with the member's express consent and they're provided with extensive terms, conditions, rights, and other protections. And your member provided this consent because the data aggregator is working on behalf of an underlying service that your member wants to use which could be a:

• Personal financial management website (R.I.P. Mint)
• Gaming website they'd like to fund with (and hopefully get paid into) their share draft account
• Financial advisor who maintains a complete, real-time financial picture for retirement planning

In all cases, the essence of open banking is making it easier for members – and consumers everywhere – to do more and do it more quickly based on the banking activity they've logged with you and every other financial interaction with you and other institutions, including but well beyond the limited scope of their credit report.

Remember this point for later.

Fast forward to the present where screen scraping is gradually being replaced by two kinds of direct connection methods. The largest financial institutions have built their own API endpoints so that fully vetted partners can call the API for Chase, B of A, Wells Fargo, etc. and bypass aggregators for faster, better connections. Among credit unions, we're only know of Navy Federal having built an API to share its members' data in the open banking ecosystem.

Most other credit unions and financial institutions overall are advancing along paths paved by their core systems. FIS, Fiserv, and Jack Henry have publicly announced relationships with one or more data aggregators – and some have productized as aggregators themselves. Finicity (now owned by Mastercard) built integrations to most cores while in parallel securing agreements one financial institution at a time.

Finicity covers over 10,000 instutitions or 95% of the U.S. and odds are you're one of them, whether it was your department or another who agreed to share member data through your core. Try looking up your own institution and perhaps some of your neighbors, peers, or competitors:  Supported Institutions | MasterCard Open Banking US

Line in the sand

When I joined EDGE, our mission was to balance the scales where most credit unions are sharing data but realizing zero value except some nominal royalties paid from Finicity or your core. The potential banking activity based risk analytics is massive – what if you could automate insights on members beyond their credit score and the standard fraud risk signals you’ve been seeing for many years?

Here at EDGE, we've started to reverse the tide by building integrations with core providers. Whether your member wants to take out a seasonal loan, buy a new car, or increase their credit limit – the first question that EDGE asks in partnership with you is whether their “on us” history supports approval without any need to query Experian, Equifax, or TransUnion. And even where you bring in the bureau data, we unlock a more complete financial picture.

After analyzing millions of accounts and billions of transactions, data scientists at EDGE have created systematic attributes and risk scores that look and feel similar to the large credit bureaus – and with more predictive value, particularly for consumers who fall short of the prime threshold, than traditional credit reports and scores.

If the member's primary account is "off us" and you don't see their direct deposit, EDGE will connect to any external account through a trusted network of data aggregation partners. This is an opportunity for credit unions to more actively participate in open banking and benefit from some of the actionable insights on their members and indirect applicants that other financial institutions already leverage.

Powerful insights

Insights from your own members' data are innumerable and powerful in their potential to transform member care in ways you've wanted to do for years. Earlier, I'd asked you to remember my point that open banking enables your members to do more and do it more quickly with the banking activity they've already logged with you and other financial institutions.

Imagine a world where those capabilities are available for your members and from your own data. Some of the use cases we've been standing up for credit unions include:

• Algorithmic income detection, quantification, and risk-weighting of paystreams directly deposited to your share draft accounts as well as external accounts to make income stipulations the exception not the norm
• Automatic rating of thin-file and no-hit members who are spending and saving responsibly versus others living paycheck to paycheck for more approvals with your entry-level cards and personal loans when they might otherwise be declined and look to high interest alternative lenders
• "Swapping-up" members and indirect applicants who would be graded in your B/C/D risk bands with incremental cashflow insights that allow you to make better offers, fund more loans, and improve your look-to-book

Beyond the financial benefits for you and your members alike, there's immeasurable improvement in customer experience enabled by cashflow insights. Or at least it's hard to measure - EDGE customers see meaningful reduction in drop-offs and improvement in conversions indicative of an overall better member experience that we're confident you'll see as well.

So let's explore where the right starting point with cashflow underwriting is for you and your members. EDGE can quickly turn around a retrospective data study to understand where there's opportunities for you to approve more with fewer stipulations and improved offers, or you can test drive our capabilities with "off us" direct deposit and indirect applicants before any investment in updating your LOS integration or risk models. We're excited to bring this important innovation to you and your members and look forward to continuing the conversation!