Pinwheel Survey Highlights Opportunity to Repair Broken Credit Scoring System that Inhibits Consumers' Access to Financial Products

• 60% of working people in the United States feel their credit score doesn't accurately reflect how financially responsible they are. Consumers' biggest concerns center around the data being up to date (71% expect the data to evaluate their creditworthiness for loan applications to be up-to-date within the last 24 hours) and that key details aren't being considered (67% chose income as the number one factor they would like included in their credit score followed by utility and phone bill payment records).
• Consumers, particularly those with lower scores, are aware of how these inefficient and inaccurate lending models negatively impact their finances. Those with lower credit are eager to share information that accurately reflects their financial picture. Over 80% of non-prime respondents are willing to share their income and payroll data with financial service providers.

NEW YORK, Oct. 25, 2022 /PRNewswire/ -- Today, Pinwheel, the market-leading provider of income and employment data engineered for next-generation fintech innovation, released a new survey revealing consumers' challenges and attitudes regarding credit scores, creditworthiness, and access to financial products such as loans or earned wage access (EWA).

CREDIT AND LENDING MODEL DEFICIENCIES

The survey results of 2,000 people working in America demonstrate the ineffective and inaccurate means of gathering and interpreting information to determine a person's creditworthiness and overall financial responsibility:

• More than 75% of people working in America believe a credit score should not be the only criterion for getting a loan. Half of the respondents stated the credit scoring system is missing information that shows they are financially responsible: income, utility bill payments, phone bill payments, and bank account balances were the top suggested alternative criteria.
• Almost 70% of respondents ranked income as the most important factor that should be considered when determining creditworthiness.
• Over 70% expect that when they apply for a loan, the income information used to determine their approval will be up-to-date within the last 24 hours. Major mortgage application decisions can be based on months-old data.

"The current financial system is unfair and inefficient when it comes to determining someone's creditworthiness and the types of financial products offered," said Kurtis Lin, co-founder, and CEO of Pinwheel. "We're still living in a world where income, arguably the most important part of someone's financial life, isn't factored into their credit score. The same world where consistent on-time utility payments mean nothing and mortgage applications are contingent on credit bureau reports that don't even include income data. This system negatively impacts everyone, and lower-income consumers disproportionately so."

INFLECTION POINT FOR IMPROVEMENT

An overwhelmingly high amount of consumers, over 80%, are comfortable sharing their income and payroll data; in some cases under certain conditions:

• 34% said they would share in exchange for access to better financial products.
• 21% said they would feel comfortable as long as they gave consent.
• 27% said they would freely share this information.

A small fraction, only 18%, said they would not be comfortable sharing this information.

"We're staring down the next era of great fintech innovation, one that must focus on increasing financial equality through the innovation of tools and services that can help consumers live their best financial life possible," said Lin. "We're actually in a place to start getting solutions like earned wage access and dynamic loans into the hands of the overwhelming majority of consumers who want these products, so they don't need to seek out payday loans or high-interest credit cards. From the perspective of financial institutions, the decision to bring these services to market should be obvious. The current system is locking out a huge portion of the population who are potentially valuable consumers. And because these outdated models loom large, this creates a contentious relationship between financial institutions and consumers. I'm excited to work with our partners and customers, like the folks at Nirvana Money, to transform a vicious financial system into a more virtuous one."

"Too many Americans struggle for access to fairly-priced financial services," said Bill Harris, founding CEO of Nirvana Money and former PayPal CEO. "We share Pinwheel's commitment to serving these customers by providing good credit for people who want to build better financial stability. Pinwheel's technology and products are important in making this a reality."

CONSUMERS DESERVE MORE; BANKS AND FINTECHS MUST DELIVER OR LOSE CUSTOMERS

Consumers believe that banks and fintechs should be their allies and provide a wider offering of personalized products:

• Consumers desire financial literacy tools and expect their financial institutions to provide them. In fact, those polled cited frequently updated financial statements and dynamic lending (terms can be altered proactively based on your most updated financial situation), as some of the features that would be most helpful to them.
• About 60% of people polled want personalized financial experiences such as automatic credit line adjustments and proactive loan repayment plans based on changes in their income.
• Well over half of the respondents are interested in EWA services from their bank or fintech.

In the absence of better lending products or to avoid more predatory options, consumers will often seek out loans from family and friends. Unsurprisingly, those with an income of less than $50k (66%) and a poor credit score (79%) are more likely to ask a friend or family member for money, with over a third of people borrowing money more than twice. Yet, 89% of people paid their friends and family back.

"This particular data point tells a sad story about people in need being failed by the financial system," said Lin. "These folks may have feared being denied or are receiving high-interest options. They were mischaracterized as uncreditworthy with an almost 90% repayment rate.  There's no reason why a bank or fintech couldn't have offered them a solution, something like EWA or a cash-flow based loan, tailored to their financial needs."

Consumers are losing faith that their primary financial relationships, particularly banks, are able to meet their needs. In fact, only 27% feel banks provide superior access to fairer financial products compared with fintechs. It's clear why this perception is declining: 77% of non-prime consumers surveyed said they did not receive full approval for their most recent loan application. Meanwhile, 8 in 10 of those same applicants would have been willing to share their income and employment data to improve their odds of full approval. There is a willingness among the majority of consumers to be evaluated more holistically, but legacy evaluation precedents in lending are missing key information about peoples' financial pictures.

Visit here to learn more about the study, Beyond the credit score: Propelling consumer finance into the future with income data.

About Pinwheel: Pinwheel is the market-leading income and employment API. With Pinwheel, fintechs and financial institutions are empowered to build the next generation of financial products that will help create a fairer financial system. Pinwheel provides access to consumer-permissioned income & employment accounts and actionable insights that help them make sense of the data they need to tailor their tools and services for consumers. Pinwheel's platform has enterprise-grade security protocols to power connections to over 1,600 platforms (covering 80% of US workers), over 40 time & attendance (T&A) platforms, and over 1.5 million employers.  From that point of connectivity, leading fintechs and financial institutions (such as Block, formerly Square) leverage us to power direct deposit switching, earned wage access, income & employment verification, and build innovative new products. Pinwheel is also a Consumer Reporting Agency (CRA), making the company the only provider in the space offering Fair Credit Reporting Act (FCRA)-compliant income and employment data that lenders can use actively in decisioning.  Pinwheel is trusted and funded with $77M by top-tier investors such as GGV, Coatue, First Round Capital, and more.

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SOURCE Pinwheel