Risk Management and Technology Services

Banking Transaction Scoring Services

Banking transaction scoring has become a popular choice for bank and non-bank lenders as the basis of their underwriting strategy. LendAPI's decision as a service can help.

Banking transaction scoring has become a popular choice for bank and non-bank lenders as the basis of their underwriting strategy. LendAPI's decision as a service can help.

Banking transaction scoring has become a popular choice for bank and non-bank lenders as the basis of their underwriting strategy. LendAPI's decision as a service can help.

LendAPI Banking Transaction Scoring Services

What are Banking Transactions?

Banking transactions are credit and debit transactions in a person or a business’s bank account. Credits are deposits and debits are withdrawn from your bank account. An example of a deposit will be your payroll direct deposit from your place of employment. A withdrawal could be a payment to pay off your credit card balance or a cash withdrawal from an ATM Machine.

Other types of data or transactions from your bank account could be fees, balances, interests earned from your positive balance. Other types of transactions such as an overdraft fee are also considered as part of your banking transaction history.

What is Open Banking?

Open Banking is a piece of legislation that requires banks to allow customers to share their banking transactions with any third party with consent. Open Banking has been the law of the land in most of the European countries. The United States will adopt Open Banking laws in the very near future.

Why is Open Banking so important?

Banking transaction data is becoming more important because many bank and non-bank financial services companies have become reliant on using banking transaction information in their underwriting decisions.

For instance, Vantage Score, a popular tri-bureau credit score has incorporated banking transaction data into their Vantage Score Plus score which could boost a person’s credit score by as much as 50 to 100 points. 

This greatly increases access to credit for those that benefit from using their own banking behavior data to present themselves in a better light in front of thousands of financial institutions when it comes to seeking credit.

How do I access my banking data?

There are many Open Banking data providers in the world. The most prominent ones in the United States include Plaid, Mastercard, Flinks, EDGE, Cash Atlas™ by Nova Credit and there are many companies that analyze banking transaction data to provide deeper insights into banking behaviors.

You can check out some of these data providers and intelligence providers within the LendAPI Marketplace under the section called” Bank and Payroll Data Verification. We have many of these service providers integrated for you to use them without having to integrate or lay down a single line of code.

Is it safe to provide data through banking data integrators?

Many banking data aggregators do not save your banking information to preserve your privacy. However, some of these banking data integrators do save your data and maintain continuous access to your bank account’s information.

Most of the banking data aggregators ask the end users to log into their bank accounts with assigned user names and passwords. They will then encrypt this information through a tokenization process. In other words, they preserve your username and password and use it on a regular basis to retrieve additional information from your bank account with your consent.

If the banking information aggregators don't save your banking data, then there’s not much to worry about, but if they do save your information for some reason, you are at risk of exposing your banking transaction information to data leaks and data breach events.

There should always be a way to revoke access from these third party data aggregators for your protection.

How is my banking transaction being used?

There are many ways a financial institution can use and leverage your banking transactions information. Here are some examples where your banking transaction information is being used to help you get a credit card approved or help you to save your money.

Banking data used to apply for credit

One of the most prevalent ways to leverage your banking data to get more credit is to let these financial institutions understand your banking behavior. Most of the time, you might encounter a banking login page allowing you to search for your bank and use your credentials to login to your banking account.

The banking transaction aggregators will download about 90 days to up to 2 years of transaction history from your bank and send that to whomever you are engaged with. These transactions are then being analyzed and used to figure out a pattern four spending and earning behavior.

Some of the most common data points they look at is the average balance of your account across a period of time. Total amount of credits and debits over the same period. And sometimes, the lender will look at how many times you may have overdrawn your account and whether you were able to bring your account current and pay the overdraft fees.

Banking data used to verify income

When you are applying for a mortgage, sometimes the mortgage application processor will ask you to log into your bank account for them to positively verify your income. The only bits that they are interested in are deposits or credits going into your account. And out of all the credits or deposit activities, the algorithm will further determine how many of that is your regular W2 styled income. This saves a lot of time and effort versus having you submit multiple months or years worth of bank statements and someone will combs through the bank statement and highlight transitions that are related to your deposit.

Banking data used to increase or decrease your credit limit

Sometimes credit card issuers will use your banking data to determine credit line increases and decreases. This is a way to reward your growing income with an increased line of credit and also protects you from overspending if there's an unemployment or underemployment event that took place in your life.

Banking data used to verify your identity

Some lenders will provide your personal information such as name, address, phone number and email that you’ve given to your bank to verify your identity. Lenders will use this information and compare it to the information they’ve received from your loan application for discrepancies.

Banking data used for small business working capital financing

If you are a small business owner and you are applying for a working capital loan. The lenders will use the bank data to determine your business's cash flow. There are specific algorithms designed to collect all revenue and fixed and variable expenses and construct a cash flow scenario to determine the health of your business. Lenders will then use this information to measure your ability to service additional debt and make you a working capital loan offer accordingly.

Banking transaction data modeling as a service

LendAPI works with a variety of open banking data aggregators. We are actively working with our clients to operate their banking data algorithms on LendAPI’s decision engine. We’ve developed a variety of models and rules for our lenders to use when it comes to determining credit worthiness of their clients.

LendAPI’s Decisioning as a Service

LendAPI can help our clients to develop their banking transaction models and execute it from LendAPI’s credit decisioning engine. We can translate and normalize banking transaction data and run our client’s banking transaction based decisioning models in real time. 

These banking transaction based models can run in parallel or in conjunction with other credit attribute based models to make a comprehensive decision.

LendAPI can also work with our client’s data science team and build strategies and models with their banking transactions data. For more information, please email us at info@lendapi.com