How Open Banking and Cashflow Analytics Can Eliminate the Stipulation Process for Credit Unions
By Craig Peterson
The stipulation process for credit unions (CUs) has long been a necessary but cumbersome task. Verifying a member's income often involves extensive paperwork, multiple touchpoints, and significant delays. This inefficiency not only frustrates members but also places a heavy burden on credit union staff.
The typical CU has about 50% of its members enrolled in direct deposit so you’re already able to see half your members income in the core ledger, and through open banking you can access transactions in their other accounts with consent. So you’d think it’s a straightforward exercise to identify underwritable income, but it turns out this isn’t an easy task.
Reviewing and analyzing individual transactions takes time. Collecting and reviewing pay stubs, tax returns, and other documentation lead to prolonged approval times and increased drop-off rates. This consume valuable time and resources, often resulting in over 70% of abandoned applications the result of too much time required or too much information requested .
Today, some credit unions are starting to eliminate stips – by outsourcing the heavy lifting to EDGE via direct integration with their core. With a firsthand view of member data, EDGE uses income detection algorithms trained by machine learning to sift through a member’s transactions and deliver a consolidated view of income in minutes.
This also reduces the friction in the process: Members appreciate the convenience of not having to gather and submit multiple documents. This leads to faster approvals as well as more approvals.
We’re taking a transformative approach to income verification. Cashflow analytics involves analyzing the inflows and outflows of a member’s accounts to gauge their income patterns and financial stability. This data-driven approach unlocks a real-time, accurate picture of a member’s financial health without the need for extensive documentation.
With open banking, credit unions can access financial data from external accounts, provided the member consents, giving an even wider view of the member’s financial situation.
By analyzing all transactions in a member’s accounts, cashflow analytics deliver a holistic view of their financial behavior including spending habits, saving patterns, and income consistency. These insights are more comprehensive than traditional data sources, leading to better-informed lending decisions.
How many data scientists are on your staff? Fintechs have outpaced credit unions and regional banks, and their analytics firepower is a big reason why. Credit unions have a secret weapon that nobody else has: direct access to their member data. And EDGE is unlocking the power of that data for you and your members.
While open banking enables other industry players to access banking activity data (including YOUR own members’ data), that requires online credentialing so drop-offs routinely occur.
By verifying income directly from your own system, you can eliminate that friction for your members and do away with the stip.
Direct core integrations that power cashflow analytics represent the future of income verification for credit unions. With EDGE, you can unlock a smarter, faster, and more member-friendly alternative to stipulations:
By reducing friction and providing a more personalized experience, you can foster greater trust and loyalty, strengthening your relationships with members. Discover how you can revolutionize your underwriting process and unlock the full potential of your data by visiting www.stopthestip.com.