A Modern Approach to Lending and Account Opening: Using Actionable Insights to Make More Informed Decisions

Today's banking consumers are taking advantage of digital services of all kinds, thanks to the speed and convenience they provide. But when it comes to applying for a loan, or even opening a new account, the customer experience can be less than ideal. For financial institutions (FIs), friction in digital application and lending processes are inhibiting bottom-line growth.

In some cases, FIs turn away potentially qualified applicants by delivering digital experiences that don’t meet customer expectations. Even a minor disruption in the digital experience can lead to application abandonment and lost opportunities. Recent industry research reveals, for example, that unless an FI can open a new account or complete a new loan application in less than five minutes (five minutes!), the potential for consumers to abandon the application increases by 60% or more.

On the flip side, institutions that complete account openings and new loan processes more quickly can drastically reduce abandonment rates—and thereby greatly increase the number of new customers they accept.  

In addition to turning away potentially valuable customers, institutions also turn down a significant percentage of applicants because they don’t meet the traditional approval requirements. Lenders miss out on the opportunity to acquire a large swath of qualified borrowers (e.g. from no-hit/no file or unbanked/underbanked populations) due to not expanding credit decisioning criterias. 

To gain market share and competitive advantage in the crowded financial space, lenders and banks must find ways to make the digital application process simpler and faster—and the loan process more inclusive to a broader population—all without disrupting their risk appetite.  

In this post, we’ll look at how FIs can modernize their processes—using actionable insights to make more informed decisions, improve the customer experience and serve a broader market of qualified consumers.


Identity verification is a key source of friction in account opening.

Institutions looking to eliminate friction from their account opening processes should focus first on identity verification. The ability to confidently verify that an applicant is who they claim to be is the most consequential step of the digital application process. It's also the most challenging.

Digging deeper, we see that synthetic identity fraud (a crime in which bad actors use fake and/or real information to create fraudulent new identities) is a top concern. 

  • Aite-Novarica Group projects that application fraud loss will exceed $4.1B by 2023—and notes that most application fraud losses stem from synthetic identity fraud.
  • The Federal Reserve reports that synthetic identity fraud is the fastest growing type of financial crime in the U.S.—and is one of the most difficult to detect.

Unfortunately, traditional identity verification tools can be unreliable for fraud detection. They can also lead to slow, and often flawed, decisioning processes—which frustrate applicants and negatively impact long-term customer loyalty, retention and profitability. 

New and emerging identity verification solutions use actionable, bank-contributed insights to reduce fraud and false positives at the point of new account opening—and serve as a first line of defense against first-party and third-party fraud. 


A modern lending process starts with a broader array of data.  


“Credit is a privilege that makes the American dream comes true. Early Warning alternative data helps achieve the dreams for the credit invisibles, expands value for the underserved what internet did for the expansion of information,” said Paramita Bhattacharjee, Early Warning’s Vice President, Product Line Leader, Risk Insights


Lending decisions based on traditional credit bureau data inhibit market growth. Most lenders focus overwhelmingly on credit scores when assessing a borrower’s risk, but this is an outdated, narrow approach that can lead to unreliable decision making. What’s more, it creates a barrier to financial inclusion. 

There are many people, often from underrepresented populations, who have not had the opportunity to build credit. But if someone doesn’t have a credit score, it doesn't necessarily mean they don't have the ability to pay. There are other data points institutions can—and should—take into consideration.

Indeed, the ability to access credit and capital is the cornerstone of the U.S. financial system. But for many communities, status-quo lending processes prevent them from gaining entry. 

Nearly 50 million Americans—disproportionately from poor and minority communities—lack a credit score and cannot obtain mortgages, credit cards or other lending products. Many people without a credit score, for example, maintain deposit accounts—which they use to pay rent, utilities and other recurring financial obligations. In such cases, banks and lenders can use financial institution-contributed deposit account data to expand their credit decisioning criteria. 


Financial inclusion and business profitability go hand in hand. 

Today, innovative solutions exist that look at alternative data to improve risk insight and speed decisioning, while allowing institutions to grow beyond their traditional customer base.

Alternative data solutions empower lenders to accept more qualified applicants—thereby increasing market share and profitability. Perhaps most importantly, institutions that adopt alternative data solutions can enable greater financial inclusion and lead the way in social good. 

Early Warning® offers an advanced data identity verification solution such as Identity Chek® Services – New Account Scores and a new solution, Expand Credit Insights, that uses alternative data to broaden the market of qualified consumers.

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