Rich Alterman  00:04

you're syncing up and tuning in to the lending link podcast, powered by GDS link, where the modern day lender can dive deeper into the future of data decisioning and Credit Risk Solutions Welcome to the show everyone. I'm your host Rich Altman, and today we're syncing up with Jonathan Gurwitz. Credit lead focused on the go to market strategy for Plaid's credit products, where he has worked for almost two years. Plaid founded in 2013, is headquartered in San Francisco and provides a technology platform that enables applications to connect with the user's bank account and other financial data, powering FinTech and digital financial products. Plaid currently operates in the US, Canada, the UK and Europe with plans for further global expansion. Their developer friendly platform currently connects over 12,000 financial institutions and powers over 8000 digital finance apps and services. Prior to joining Plaid, Jonathan led partnerships for Credit Karma Personal Loans business and helped build consumer credit progress Aveiro bank, Jonathan holds an MBA from Stanford University and a BA from Dartmouth College. In this episode, Jonathan hight will touch on key trends related to open banking, and the use of bank transaction data to augment lenders risk management and so much more. But before we dive into the interview, please head over to our LinkedIn and Twitter pages at GDS link, that's GDSL i n k and hit those like and follow buttons. If you have not done so already, please subscribe to our podcast on Apple podcast, Spotify or wherever you prefer to listen to your podcast. Alright, now let's get synced with GDS Link. Welcome, Jonathan. I hope you have a great week so far. And thanks for participating in the podcast today. So where are you joining us from today?

 

Jonathan Gurwitz  01:47

I'm joining from Boston. So I actually grew up about an hour west of Boston in Worcester. But I've only been back in Massachusetts for the past two years or so. So I spent the prior 12 years split between New York City and the Bay Area.

 

Rich Alterman  02:02

Okay, where exactly in Boston are you?

 

Jonathan Gurwitz  02:04

I'm in Jamaica Plain. So it's relatively residential area on the outskirts of Boston, but accessible to kind of downtown in the city to airport, etc.

 

Rich Alterman  02:13

Well, Boston, certainly one of my favorite cities. I graduated from Boston University in 1982. And then worked for Bank of Boston from 1985 to 88. And I understand that you're a really big Celtics and New England Patriots fan. How are they done this past season?

 

Jonathan Gurwitz  02:30

Yeah, it's really a tale of two teams. So past season, kind of the Celtics made the Eastern Conference Finals, another strong season for the team, I'll obviously would have wanted to see them win a championship. I'm excited about the new season that's kicking off. They've got an updated roster, and I'm feeling feeling good about the season. I think the Patriots are candidly pretty hard to watch right now. It's about as bad as I've seen the team over the course of my life so far,

 

Rich Alterman  03:00

Right?

 

Jonathan Gurwitz  03:01

We've had an amazing run. We've dominated the AFC East really, as long as I can remember, but the post Brady era has not been going well. The trend line seems negative. But you know, I guess what I'd say is taking a step back. I'm pretty spoiled. As Boston sports fan. We've seen a ton of championships in my life so far. And, you know, I think on balance, there's there's no better place to be a sports fan.

 

Rich Alterman  03:25

So have you had a chance to attend a lot of the Celtics games?

 

Jonathan Gurwitz  03:28

You know, I have attended a few. I will say with the team being really good. Ticket prices are insanely expensive. It's really wild. So you know, effectively nosebleed tickets, you're looking at pretty high prices, regular season games, so it's really easy for me to get there, but it's an expensive one.

 

Rich Alterman  03:48

Just like the green associated with the Celtics Shamrock. I'm going to make you a green with envy. Because when I worked for Bank of Boston, my friend had five seats on the parquet floor. And this was during Larry Bird, Danny Ainge, I was there for the finals. had friends calling me from Ohio. How do you get those tickets because I sat right where the players would come onto the floor. So it was pretty credible flooding.

 

Jonathan Gurwitz  04:12

That's amazing. I'm jealous. I need to get Plaid to consider for seats.

 

Rich Alterman  04:17

There you go. There you go. Okay, good. Well, yeah, let's thanks for sharing that. So let's get a little bit personal before we kind of stepped into the meat of today's session. Before joining Plaid you are with Credit Karma and Vero bank. You know, maybe can you share how some of the work you did at those firms led you to a decision to join Plaid?

 

Jonathan Gurwitz  04:36

Yeah, absolutely. Perhaps starting one step back. I started my career in finance, doing investment banking and growth, equity investing. I saw there a huge opportunity and fintech we've met with a ton of companies got to spend a lot of time in the sector. And really my takeaway there was that the quality of the digital user experience in other industries. Like, online retail, or booking travel online, had improved so much. But financial services remained behind. Again, there's there's a ton of opportunity. And I also saw this exciting ecosystem of companies forming, many of whom are Plaid customers. So the Venmo is of the world, the Robin Hood's of the world SoLiFi's the world. So you know, at that point, after having kind of spent time in the investing world, I decided, I want to actually join one of these businesses as an operator. But I think, you know, my criteria for joining a company was, I wanted it to be mission driven. And this one sounds broad, but I want it to be focused on solving a really important problem in financial services. And so that's what took me to Varro, I was excited about the idea of building a bank from scratch really focused on solving customer problems. When I joined there, I was focused on the lending side of the bank that was then forming, and helping them launch consumer credit products. That experience is really formative. It helped me understand the challenges, the opportunities in lending, really get in into kind of the guts of origination servicing collections actually work closely with another podcast guest of yours, Rich Wyle but no, you know, after Varro, I decided to join Credit Karma to help lead their personal loans business, and specifically engage with many of these lenders around building innovative experiences. And so, Credit Karma is a massive platform serving over 100 million users a large digital acquisition channel. And I was excited about the opportunity to bring to those Credit Karma users the Credit Karma members a frictionless highly certain experience for finding financial products like personal loans. And I think that's what brings me to Plaid here where I've spent close to last two years at Credit Karma and Varro. And I saw aspects of consumer lending industry that at times focus really heavily on traditional credit data, traditional scores. And I saw an opportunity to scale cash flow underwriting, and underwrite on a more holistic picture of the borrower. And I think that this concept, and this approach has such tremendous potential and I think that's really my focus and my work at Plaid.

 

Rich Alterman  07:18

Question at Credit Karma. Did you get involved? I know one of the one of the things those type of platforms bring to the table is, you know, financial education, financial literacy, did you get involved with that at all, because I certainly see it as it's still a very big gap in this country, as far as really, you know, pushing more financial education to especially our young, the young population, as are in high school and graduating from college. Any thoughts on that front?

 

Jonathan Gurwitz  07:43

Absolutely. And that's really at the core of credit, karma is mission of championing financial progress for users, they've really done a tremendous job in helping create awareness amongst consumers around their credit, their credit score, factors that impact their credit, the ability to, if you're seeing something that looks inaccurate, finding an efficient way to kind of address that, and get your score updated. And so I think Credit Karma has done done a great job there. And it was exciting to be part of that. I think the second piece is helping consumers understand what credit products they're eligible for. So using the platform to understand prior to applying whether you're likely to be approved for a product, so it's really exciting, you can go in there and get a sense for your likelihood of being approved, which is a really valuable thing and saving folks, the negative customer experience of being declined.

 

Rich Alterman  08:38

Well, there's a lot of a lot of good solutions out there in the market, right to to help people really break down their scores and understand how they can work hard to improve them. And we do it we are seeing several states, right that have implemented that requirement to graduate from high school with a financial literacy course. So it's nice to see that we're trying to make some strides there. You're in the role. Now, Jonathan, you head up the go to market lead for Plaids credit business unit, maybe talk a little bit about what that means. And maybe before you dive into your side of the business on the credit, maybe talk a little bit about what other verticals Plaid operates. Besides financial services?

 

Jonathan Gurwitz  09:14

Absolutely. So I serve on the leadership team for our credit business. So that's one of our four kind of key business units, that Plaid so we've got a business unit, mine focus on kind of the credit ecosystem. We've got a payments business unit focused on a number of different payments use cases, we've gotten an identity verifications business unit. And then we've also got a connectivity business unit really focused on unlocking Personal Financial Management use cases. That gives you a sense for kind of the different teams then there's a whole bunch of horizontal teams supporting these business units. When I think about the work that I do on the credit team. I really think about it in two components. One is I oversee strategy and execution for all of our go to market efforts, so thinking about how we engage with prospective customers, existing customers, partners, and the broader credit ecosystem in which we operate. And the second component is we're also responsible for bringing the voice of the customer back to our product design, engineering teams, ensuring that we've got a roadmap that resonates and supports customer pain points and needs.

 

Rich Alterman  10:27

Great, very helpful. Yeah, let's kind of get down to business. And thanks for sharing some personal background. If I reach out to any of our clients, and, you know, we have some mutual customers, we are partners, I say, what is Plaid do? I know two words I'm going to hear is open banking. And it's not a term that's new. It's been around for a while, but maybe I always like to think about if you're at a cocktail party, and, you know, you met somebody and said, Hey, what is this open banking thing I hear about? How would you describe that to the layperson.

 

Jonathan Gurwitz  10:56

So we think about our business and open banking is really a network that includes three key components. First, you have connectivity into 12,000, financial institutions. Second, you have over 8000 apps and services that are leveraging that connectivity for various use cases. And third, you've got the actual consumers who are permissioning their data. So we estimate that roughly one in three Americans with a bank account, have leveraged Plaid to link an account. And so what this unlocks is a really exciting set of use cases. And it's really helped to drive innovation across financial services. So you can think of some of these use cases. So consider a personal financial management app that takes kind of disparate financial data across the various accounts that that you're engaging with and helps you understand, kind of from a 360 degree perspective, how are you positioned, you can think about a bank, that's onboarding a new customer, you need to transfer funds from an existing bank account to kind of get up and running. Or you can think about a lender that's leveraging the data to create a more efficient user experience and do things like income verification. So there's a whole host of use cases that kind of innovative institutions are leveraging to drive forward high quality customer experiences.

 

Rich Alterman  12:13

Well, good, good. When you were talking about, I think it was Vero and Credit Karma. You talked about joining a mission driven company. I noticed on the Plaid website, the company's stated mission is to unlock financial freedom for everyone. And further face that played his focus on the democratization of financial services through technology, pretty bold mission. And I think he kind of touched on some of those points. But once again, why is that the mission of the company?

 

Jonathan Gurwitz  12:39

Yeah, I think what's exciting for me is particularly sitting on our kind of credit business team, the work we're doing is extremely mission aligned with what you just just shared there. And maybe taking a step back. Unlocking financial freedom is very much the core thesis applied, we believe that people should have control over their finances, and have access to an ecosystem of financial products that help them on that journey, on the credit team specifically, we are focused on expanding access to credit, and helping deliver more affordable credit by bringing in cash flow data that previously might not have been leveraged or not leveraged, or is not being leveraged effectively. And ultimately, we do this through our customers. Often lenders, often institutions with lending use cases, who are building these innovative credit products to support consumers.

 

Rich Alterman  13:29

Most of our mutual customers are really in the lending space, right? We have several clients that are using the Plaid platform to help in their underwriting space. So bringing on a loan, maybe just touch on a little more detail on how those lenders, you see them optimizing the Plaid platform and how they, you know, what do they do with that data when it comes into their shop?

 

Jonathan Gurwitz  13:54

Maybe I can share a bit around kind of the use cases in the progression of the loan lifecycle, right. And really, all of these solutions are unlocked via a user linking their account just once during an application process. So the first use case I would call out would be decisioning. So the bank account transaction data balances are effectively a consumers cash flow statement. It tells you about your consumers income, their expenses, their savings, really critical information for our ability to pay underwriting. And so most lenders will use this data alongside traditional credit bureau data have a complete financial profile, and they're able to assess both willingness to pay and ability to pay. The second use case kind of again, continuing in along kind of the the loan lifecycle in the origination lifecycle would be income and asset verification. So specifically, on the income verification side, we've got a waterfall that includes bank account connectivity, and includes payroll connectivity, and then an include's a fall back to a smart document upload product, which enables folks to use it to upload things like pay stubs, W2 s bank statements, parse that documentation can also return to fraud signal, alongside income verification, we also have identity verification. So we've got a full suite of capabilities there everything from lining up and ensuring that the identity of the bank account holder lines up with the identity of the applicant, ensuring that applicant information checks out against regulated databases, and then a full suite of anti fraud solutions. And then lastly, as you kind of think about the tail end of the origination process, obviously an important piece is setting up disbursements and repayments. And so we've got a full set of payments capabilities, as well as everything from your basic ACH setup, processing those payments, managing transaction risk, and accelerating those payments via RTP. Rails.

 

15:54

You

 

Rich Alterman  15:54

You know, one of the questions that comes up a lot is coverage. And I know you mentioned the number of financial institutions that you work with, what would you say your coverage is at Plaid? I mean, are you guys in the high 80s? Any sense of that number? But I mean, I know you talked about the 12,000 financial institutions. But you know, what does that equate to?

 

Jonathan Gurwitz  16:10

The US has one of the most fragmented financial services ecosystems with 1000s of financial institutions, banks, credit unions. And increasingly, consumers are also using digital first neobanks. So what we've been focused on is scaling both coverage and reliability. By taking an API approach to building account connectivity. We think about scaling this coverage in a few different ways. First, we have open finance partnerships with the largest institutions in the country. So companies like Capital One, Chase, Wells Fargo, City, American Express. Second, we think about supporting the broader ecosystem of institutions, including small banks and credit unions, to facilitate these API based integrations, the partnerships we have with banking platforms such as Pfizer, Jack Henry, Q2, and others. And as many consumers are now signing up with digital first banks. We've also added connectivity for fintechs, like Chime, SoFi, Green Dot and others. Finally, I just call out that for folks that are unable to connect their institution, we often provide fallback solutions, enabling a complete waterfall approach for customers.

 

Rich Alterman  17:26

Within that waterfall discussion, one of the questions I was asked once by a client was is there a way to, you know, once again, thinking about that customer experience? Do you offer a solution that allows us to validate whether you actually have the linking to that particular bank that the customer has listed on their application, so if you don't, you automatically put them into a different path, so they don't have a bad experience of logging on to plan and then finding out lead doesn't support ABC bank.

 

Jonathan Gurwitz  17:57

As we discussed, we're focused on expanding our coverage via API solutions. And so our goal is to ensure connections are reliable at all times. For customers, we provide a dashboard for managing their plot integrations. And in this tool, we've been adding new intelligence and analytics to show connection health across institutions, and trying to make it easy for customers to see in real time institutions that might be having issues. For consumers, we've added new features to our link product, which is the user experience where consumers connect their financial accounts via Plaid. We've revamped how we tell consumers what is happening, for example, if the institution they're looking to connect with is having issues. And the goal here is to avoid unnecessary friction for users. So overall, ensuring best in class connectivity has been and will always be a huge focus for Plaid.

 

Rich Alterman  18:02

So you know, it's interesting, you talked about fraud and identity verification, I read that you guys back in 2022, you acquired a company called Cognito. As you think about your future, are there other you know, obviously, don't you can't list out who they are. But are you constantly looking for, you know, other companies to potentially acquire that kind of fit nicely into your suite?

 

Jonathan Gurwitz  19:10

Yeah, maybe I can talk about kind of the Cognito solution quickly, and share kind of value that's delivered for Plaid, the Cognito platform, which is now Plaid identity verification provides really comprehensive solution for verifying the identity info. Step Up authentication flows with anti fraud tooling. And I think that's really exciting in the lending space. Because identity verification is core to our customers, lending flows and often happens alongside things like income verification, the use case that we've been supporting for years. And this really enables us to do more and more for our customers. And so we like the idea that, you know, we've got a breadth of use cases that we can support, enabling, you know, our customers to get up and running with a number of different solutions or growing into incremental solutions. At the same time, I don't have any specific feedback for you around, where we're where folks are focused on as we think about kind of our priorities, I think we're really excited about the use cases that we're operating in right now. And I shared some of those, the work we're doing in credit, of course, the work we're doing in payments, the work we're doing to scale identity verification, and continue kind of our strong presence in supporting personal financial management.

 

Rich Alterman  20:28

You know, one can't be in the industry and not be hearing about the rule 1033 and the CFPB, which is, was released on October 19. Let me actually kind of just quote it here. So on the 19th of October, the CFP releases notice of proposed rulemaking for the required rulemaking of a personal finance data rights, which will implement section 1033 of the Consumer Financial Protection Act. And it goes on to other things. And I know there's a right now they're under the phase where they're looking for comment coming back from the industry. I think they published the 299 page document, I actually took a scan of it the other day. And you know, one of the things that I read was this discussion about whether or not companies in the space will potentially or potentially need to become CRA s, and they talk about connectors like yourself Plaid that are they call it like a dumb pipe, just reaching out to the to the to the platform themselves. But then those that want to go to that next step where they maybe put some meat behind the data. In line with that your company recently announced that you formed a new entity, Plaid CRA Inc, that will allow it to build innovative credit solutions for both customers and partners. And at the end, this entity will actually operate as a separate division, if you want to, you know, maybe just share more about that company and what your goals and objectives are for Plaid CRA Inc. And I think that'd be really interesting.

 

Jonathan Gurwitz  21:51

Yeah, happy to, I think maybe I can start by sharing a little bit around our motivations in in kind of this announcement and standing up this this CRA entity. The first piece is we focus a lot on being customer centric, and listening to customer feedback. And what we hear from our customers is that they want us to go beyond sharing the digital cash flow data that you know, for many of these customers has been so helpful to them, and provide actual out of the box insights that are ready to use, the value for our customers is this helps them get to market more quickly. This helps them get more value from the solution than perhaps building something in house. And it reduces the overall investment required to support the solution. So you're getting this data, you know, how much work do you need to do to transform the data into logic that unlocks these use cases. So we think we can add a lot of value there. The second piece is in related is this is really a natural evolution of our kind of credit product suite. We've scaled our business dramatically in lending by providing best in class coverage, conversion data, and it felt like the right next step, to move into insights and solve more customer problems in a deeper way. So we're really excited about kind of those two pieces. In terms of kind of what that unlocks, you know, our view is, having out of the box insights helps us do a couple of different things first, expand to new use cases. And then second, that helps accelerate the adoption of cash flow underwriting in the broader market. So if we think about use cases, of course, we've supported income verification for a long time. But having out of the box insights can be helpful in operationalizing, using cash flow data in decisioning. And then as we think about segments of the market that have not been as quick to adopt cashflow underwriting, again, having those out of the box insights will be particularly helpful in getting those folks to market more quickly, helping them get more value from the solution. So that's really how we think about it.

 

Rich Alterman  24:08

Are you seeing the same utilization rates in consumer lending in business lending? So I don't know if you get involved with business lending? I would assume you do within your within your purview? Is the adoption rate in business lending as high on the consumer, as the consumer side? were higher, maybe.

 

Jonathan Gurwitz  24:28

So we see tremendous adoption from both in some ways. You know, when we look at some of our earliest customers, it was really a pretty even mix between consumer and particularly small business lending. In small business lending, the credit bureau data availability can be weaker. So it's so critical that you get that cash flow data to assess kind of what that business can support from a from a debt standpoint. And so, some of the the small business lenders were some of the earliest adopters of our product, and they see a ton of value in some of the use cases I outlined before helping leverage that data in making a decision in understanding what are the right terms, loan amount, etc. So we see a ton of adoption in the small business space, small business lending space as well. And we're excited about continuing to kind of support that.

 

Rich Alterman  25:23

I think COVID started before you joined plaid. So but maybe you have some, some statistics that you can help us with here. So we know that during COVID, consumer credit files were definitely impacted by placing trade lines in deferment and forbearance. And then you had a lot of stimulus money, which put more money and ability for people to both pay off debt and save as well. And a lot of articles about credit score inflation, especially in subprime and near prime consumers. So during COVID, and perhaps more importantly, coming out of the COVID period, you know, it's interesting, when we think about, you know, sign up for plaid utilization of Plaid, did you see really a big increase in the use of your type of offering as a result of COVID, and also as a concern about the credit bureaus and some of the distortion that you might have had from the deferments, and forbearances.

 

Jonathan Gurwitz  26:14

So I'll start by saying, I was not at Plaid, I was then at Credit Karma, leading our lender partnerships and personal loans. But I think I have something relevant from my time at Credit Karma, and perhaps we can get back to plaid. But we saw an interesting thing happened over that time when I was there. And to set context, this is at the onset of COVID. So call it March 2020. If I remember my timing correctly, there was deep uncertainty in the market, capital markets were not really functioning. So lenders that required loan investors, securitization, or having liquidity challenges, unemployment, depending on how you define it was really spiking. And so you know, this is this is publicly reported, lenders were pulling back from acquisition, they wanted to preserve their liquidity, and they were worried about risk in the market that they potentially didn't have visibility into. And so this wasn't ideal for us, for me in my position at Credit Karma, because, you know, we were focused on our members, and we wanted to ensure that our members had access to credit offers, and that they were eligible for those offers, particularly in a time of need. So I'd have these conversations with lenders and I'd say, you know, what would help you feel better about the riskier and kind of keep you in the market, originating, and consistently, what they would share is cash flow data. And that's why, and they'd say, you know, the environment is shifting so quickly, that they really need real time data, they need to see that the individual, the applicant, who's whose application they're reviewing, is still collecting a paycheck, and will have the ability to pay for the product. And so, yes, I do think COVID accelerated the adoption of cash flow, underwriting and really emphasize the value of kind of having that real time visibility. And I think that that focus kind of persists through today. I mean, you look at the macro environment, and it remains highly uncertain, the impact of things trends, like gas prices, or broader inflation on consumers finances, the impact of student loans and how those payments come back in and what that's doing to a consumers budget, these trends can be really impactful. And so that's something that cashflow data is a really valuable source for lenders in leveraging.

 

Rich Alterman  28:42

Yeah, we talked a lot about the student loan impact in my last podcast with TransUnion. You know, it's really interesting, they did a study that looked at, they call it like excess liquidity by looking at what was the amount of money that people were paying above and beyond their monthly minimums. And it was about $350 a month, and the average student loan debt that just kicked back in October is about $350 a month. Right? So it really shows that a lot of those consumers that had federally backed, guaranteed student loans are going to be struggling. And certainly we're seeing prices are continuing to rise. You know, one of the things that is always interesting, I know you I'm sure you get asked this when you're signing up new clients, and that's what is the expected take up rate of people's willingness to log on to play ad and share their banking data prior to joining GDS I was with Teletrac, which was one of the first actually the first payday loan credit bureau, we dealt with a lot of the short term lenders where they were actually some of the early ones to adopt the use of banking data started out with faxing, faxing backstage bank statements, and then, you know, they they started using online banking data. They had a way, you know, you know, what's the carrot to get me to want to do that? Right. And it was abou how quickly I could find, right? If like, if you're willing to not send your bank statements, but log me on, then I can help you get your money more quickly. Do you see that as the same kind of motivator in this space as you think about your clients? Or does it really tend to be driven more by, you know, either the product that's being applied for where maybe there's a different adoption rate? And also, how does the age of the applicant, certainly, my generation, I've told friends, Hey, would you ever log onto your bank account to apply for a loan? And they look at me like, Are you kidding? I would never do that. Right? But then I'll say to them, Do you use any systems like Mint whatever the new name is? And they say, Yeah, I'm like, Well, wait a minute, you know, you're giving up more information. When you're using those or your financial planner, you've linked every single one of your accounts. So this is definitely an age thing, right, as peoples are more comfortable growing up in a digital world. So just curious what what type of stats you might be able to share with the with the listeners today.

 

Jonathan Gurwitz  30:59

I think we've seen again, really strong adoption, really driven by, you know, the ubiquitous use of a lot of exciting apps and applications and services. So you think about products offered by folks like Venmo, like Sofi, a lot of folks have gone through that experience. And I think the number of use cases continue to expand and where folks might see a bank account leaking experience is growing to new places. So you might see it, when you're opening a new bank account, investment account, taking out a loan, leasing an apartment, there's a lot of different places, I think folks are seeing this and increasingly getting comfortable. As a shared, we estimate that roughly one in three Americans with bank account, have LinkedIn account fee applied. And so again, you're you're thinking we're operating at a relatively large scale, and a lot of folks have have engaged with the product. I do think one thing that we see, in terms of how folks implement our solution is, you can get differentiated performance by being really thoughtful about how you prepare users for that experience. And so that's something we spend a lot of time with our customers on. I'm thinking through how to provide kind of contextual guidance for kind of, again, preparing the user to go through that experience, and kind of what to expect. And so that is a key component to it. It's really dependent on the use case. And again, we're our account management team or implementation team has a number of best practices.

 

Rich Alterman  31:30

Yeah, that's good feedback. And I've heard clients that have used, you know, various solutions, talk about that customer experience, how is that customer interfacing with the solution, and that could cause issues, or it could be a very positive experience. So that's certainly something for our listeners to think about as they're potentially looking at solutions in the space. So we talked at the beginning of the podcast, the use case around originations booking loans, but certainly when we think about the full credit lifecycle, you talked about income verification, and you talked about ID verification, but thinking about that credit lifecycle, right, so we start out with originations. But can you talk to how your clients are using that open banking data? Or the banking data really, once that accounts been booked? Right, so I've booked that $35,000, unsecured loan, what are the other value propositions I have for leveraging the data that I've entered the integration that I've done with a company like Plaid.

 

Jonathan Gurwitz  33:35

So I think there's a couple areas where we can support there. And I'll talk through a few examples here. And these examples are ways that our customers can deliver more value to their customers, that the borrowers that have taken out products. So like starting with the most basic use case, thinking about saving customers, NSF fees by doing balance checks, or risk checks around the likelihood that a payment will go through when you're running your kind of monthly monthly payment file. So before you collect that, before you kind of reach out with that request, being able to get a sense for whether the customer has has funds in their account. And again, this can add a lot of value for the for the consumer, because, you know, if they don't have money to make that monthly payment, you know, they can incur that NSF fee. So, you know, I think that's hugely beneficial for driving NPS. The second piece is if you think about an open ended credit product, so a credit card, you might be able to deliver additional credit flexibility, additional credit limit, if you're seeing positive trends in the bank account, or you know, be able to support customer that's having a challenging time making their payments through thoughtful modifications that really align with their ability to pay. So that's a number of ways where we're engaging with customers around rethinking the servicing process and making it an overall higher quality experience for the borrowers.

 

Rich Alterman  35:09

Yeah, I mean, there's just such a wealth of information that you think about someone who has a direct deposit of $10,000 a month, and all of a sudden that drops to zero. Right. You know, the first question is, have they gone somewhere else? The second question is they haven't gotten anywhere else. What's happened? Right? Well, I lost my job. Well, wow, you have three loans with us? How are we going to work with you? Right, in a proactive way, instead of a reactive way? So one of the things I've wondered is, when people permissioned themselves through through a plaid, and they you know, they bring up and they have multiple accounts with a bank, right? They have their checking their have their savings they have maybe investment accounts, do you find and as this back to that customer experience, you talked about educating the customer as they're gonna go through the process? Do people pretty much just stick with their checking account, or are there lenders that have been successful in getting consumers to not only link, you know, and show the information in their checking account, but maybe their investment accounts with the bank, so they have a more holistic view of their their net worth as an example?

 

Jonathan Gurwitz  36:20

I'd say this really depends on the use case. And there's an element of how you're preparing the user for the experience that's supported by plaid. So when we think about a lot of the unsecured use cases, what users are often prompted for is to link their primary bank account where they're receiving their direct deposits. And so that's typically going to be a single linking experience. And the lenders in this space are really focused on driving, quick, highly efficient origination experiences. And so that's typically what we see, as you scale up loan size and get into secured loans, particularly on the mortgage side, those lenders and those originators are going to be more comprehensive in wanting to understand the complete financial profile. And so that's where they will encourage users to link all of the accounts that kind of represent that complete financial profile. And, you know, when we think about our conductivity, we've got access to not just banking institutions, but also, you know, major investment advisors. And so users are able to link a number of different accounts and ensure that that data is available for lenders as they kind of work through their underwriting process. And so it's kind of a product of those components of how the lender is preparing the user, as well as the use case that they have in mind.

 

Rich Alterman  37:45

Well, I'm keeping an eye keep an eye on the time here, and we're coming towards the end of our podcast today. So let me let me just maybe throw out one last question. And I'm going to ask you to put on a consulting hat for a few minutes and be maybe a little unbiased. So this has become a pretty crowded market. Right? We have Plaid we have Finicity, we have Yodlee. We have direct ID we have AmEx, the list goes on and on and on. And, you know, we're often asked, Well, why should I use one versus the other? So if you are now part of the GDS team, and you're providing some consulting to a client that says, I want to use open banking data, what checklist should I create to decide which vendor to use? So maybe I'll let you kind of close with that.

 

Jonathan Gurwitz  38:32

All right, well, it's exciting to hear I'm on the GDS team, in this hypothetical example. No team I'd rather be on. Okay, going through there's a lot of things to consider here. So maybe I'll just share a few. I think the first component I would consider is, when you go into the process, having a clear sense for the use case, you're trying to unlock and saying, Can that vendor deliver on the basics of this that use case and open banking? It's typically you're thinking about things like coverage conversion scale. The second component, I think about is, again, with that same use case in mind, what is kind of the unique or differentiated capabilities that this provider can deliver? Are they offering unique insights? Are they offering things that you're not seeing from other providers? And so that that buckets really around differentiation? And then the third piece I'd consider is, is this vendor going to become a partner that you can scale with, that you can unlock new use cases with that you can do innovative things with? And so that's kind of the three buckets I'd look at, if I'm the consultant in this example.

 

Rich Alterman  39:50

Oh, good. Well, thanks. Well, it's time to wrap up. This is Rich Altman, and we've been syncing up with Jonathan Gurwitz. Lead for Plaids credit business unit. I want to thank Jonathan for joining me today and sharing his insights on open banking, and how it has already been reshaping the financial services industry. I think Jonathan's given us a lot of things to think about, as we think about vendors like Plaid, and the various use cases that you can take advantage of across the full credit lifecycle. For our listeners, you can learn more about rule 1033 that we talked about earlier by visiting the CFPB website at WWW dot consumer finance.gov. We hope all of you enjoy this podcast, please stay connected with GDS link and the lending link to listen to future podcast and catch up with ones you've missed. Thank you and to make it a great day. Thanks for listening. If you've enjoyed today's episode, please be sure to subscribe on Apple, Spotify, Google or wherever you listen to your podcasts. And be sure to leave us a review. Follow us on LinkedIn and connect with us on Twitter at GDS link that's at GDSL I NK have a question for the show or have a specific topic you want us to cover. Hit the link in the description to drop us a note. Thank you for lending us part of your day. Make it a great one.