Jul 07, 2016 Walt Wojciechowski
Fintech's influence on the financial sector is huge, and it's showing no signs of stopping. In a recent blog, we discussed the role that #bigdata is playing in this space, as fintech startups leverage smart data to deliver previously unavailable insights.
In this blog, we're going to dive deeper into a specific fintech area: data aggregation. Data aggregation holds tremendous potential for businesses, especially lenders. However, to get the most value out of data aggregation technology, you need to chose the right service provider.
More information, better insight
The concept behind data aggregation for fintech is pretty straightforward. The service provider will have access to a range of consumers' data, in this case financial ideally covering a broad time frame. By analyzing this information, the fintech firm can deliver accurate insight and an overview of a given person's financial history.
For a lender, the value here should be clear: Data aggregation enables better-informed decision-making. Lenders can cut down on risk when considering whether or not to extend credit to a particular applicant.
Additionally, data aggregation is an incredibly useful tool for verification purposes. By examining large amounts of financial data, these service providers can definitively determine whether a person is who he or she claims to be and if that person failed to report certain financial obligations and loans. Data aggregation can also identify suspicious financial activities, such as fraudulent bank statements.
All of this combines to provide a clear financial advantage to lenders. According to Forbes contributor Ryan Caldbeck, new technology-driven data aggregation analysis, #riskmanagement and underwriting enables online marketplace lenders to cut down on lending costs by 400 basis points or more relative to traditional banks.
Getting data aggregation right
With such clear-cut value on offer, the only real question lenders need to address is how to best pursue data aggregation solutions.
As we've covered in a previous blog, the rapid growth of the fintech space presents major opportunities for businesses eager for new ways of improving their capabilities. At the same time, though, this crowded space also can make it difficult to find the ideal partner.
When it comes to data aggregation specifically, the biggest factor to look for is also the most obvious: the financial data itself. The scope and type of information leveraged by a given fintech firm will determine just how useful the insights produced prove to be.
There's a tremendous amount of variation in this regard among different data aggregation fintech firms. In some cases, the data sources are limited to as few as 10 financial institutions. While that may still lead to valuable insight, it's far from ideal.
Microbilt's Instant Bank Verification solution, by comparison, offers real-time access to data from more than 20,000 financial institutions across the globe. That offers a much more thorough, reliable level of insight for lenders eager to know more about their customers and potential clients. That in turn ensures that these businesses are able to make the most informed lending decisions possible.