In fiercely competitive environments, survival often depends on adaptability. But when it comes to business, you don’t just want to survive — you want to thrive and grow.
For banks and fintechs, in particular, that success hinges on their ability to adapt to market needs. Between inflation and rising cost of living, customers now demand more support and personalized service from their financial institutions. But, when credit underwriting processes become siloed through the use of fragmented data sources, assessing applications can turn into a tedious, never-ending task — one that requires underwriters to gather extensive customer information all over again.
Zoya Khurana, Senior Product Manager at Alloy
With any lending decision, it takes significant resources to accurately weigh the credit risks against the potential returns. There is also a duty to make smart, inclusive credit decisions that provide better access to funds and financial services. So, it is no wonder underwriters struggle to process applications without falling behind.
Rest assured, there are solutions to these challenges. With the right technology in place, you can:
Seamlessly convert your credit policies into streamlined workflows to make quick, intelligent credit decisions — no coding required.
Leverage the data you gathered throughout the customer lifecycle and pair it with a broad range of third-party data to get a clearer picture of customers’ financial health.
Confidently extend personalized credit offerings at the right time, while keeping business risks in check.
Let's dive into banks and fintechs’ present challenges with credit underwriting and how Alloy can help solve these issues.
Credit underwriting is the process lenders use to determine the likeliness of a customer's ability to repay a loan. It requires lenders to take extensive steps before deciding on a loan approval or rejection. To make this decision, underwriters evaluate the individual's credit history, debt-to-income ratio, employment verification, and other risk factors as a part of a credit analysis.
Beyond evaluating creditworthiness, underwriters also assess specific factors, such as the requested loan amount, proposed loan terms, and interest rates that align with the applicant's risk profile. For mortgage and home loans, this includes reviewing real estate appraisals, property insurance policies, and the borrower's homeowner history. For personal loans and credit cards, the focus shifts to unsecured risk factors and repayment capacity.
Coupled with legacy systems, inefficient processes hold back underwriting teams. In a market where consumers have higher expectations than ever, lenders must prioritize tasks with a strong, strategic impact. That begins with improving actual underwriting processes so teams can work more efficiently and, ultimately, improve customer experiences.
Even with all the digital advancements occurring in finance and beyond, traditional credit underwriting has not changed at some institutions. For underwriters, this is a big deal. Every day, loan officers sift through bank statements, tax returns, and various metrics from different sources to evaluate liabilities, assess repayment capacity, and make sound, profitable loan decisions across products from personal loans to mortgage loans. When this data remains fragmented across multiple systems, it can seriously affect the accuracy and efficiency of loan application processing.
Moreover, without a consistent baseline, different standards across underwriters can lead to unpredictable and subjective application outcomes. That is unsettling when you consider the large sums of money at stake.
Learn how Alloy increases credit inclusivity with Nova Credit
Here are Alloy’s tips and tricks for optimizing underwriting in financial services:
A lot goes into determining an applicant's creditworthiness, but ultimately, it often comes down to the credit score.
Unfortunately, credit scores don't tell you the whole story. After all, 19% of U.S. adults have unconventional credit scores. Additionally, millions of Americans are credit invisible, unscorable, or have subprime credit scores. As a result, their access to credit is severely restricted. Not only does this threaten their financial well-being, but it leaves an entire market of sound, would-be borrowers off the table for lenders whose credit models cannot (or do not) accommodate their non-normative credit history.
For instance, you might be overlooking some quality applicants, such as new immigrants, because of a limited credit decisioning model. These decisions contribute to existing financial barriers faced by underserved segments and perpetuate the wealth gap. Or, maybe you’re going to the opposite extreme and approving applicants based on an incomplete picture of their financial health. Either way, lenders leave money on the table.
Worldwide, innovative banks and fintechs are looking to open banking and application programming interfaces (APIs) to support their decision-making and solve these persistent challenges. Through open banking, financial service providers are able to safely view customer data across different banks or fintechs in a single place. This means underwriters have secure access to comprehensive, integrated information about a customer's financial situation, regardless of where they bank.
Learn how leading banks and fintechs verify thin-file applicants
James Baston-Pitt, EMEA Growth Director at Alloy
Before thinking about consolidating customer data across various banks or fintechs, it’s important to address data integration within your organization. As mentioned previously, financial services teams often work in isolation.
For instance, credit underwriting and fraud prevention teams work in data silos, leading to communication gaps. Although both teams aim to reduce risks for banks or fintechs, they often use different data and different tools, resulting in different risk assessments for the same applicant. (This can also lead to duplicative customer requests for the same information, which causes unnecessary friction.) Closing this gap is the first step toward making more holistic lending decisions.
With Alloy's Journeys infrastructure, the flexible architecture underlying our decisioning engine, allows you to seamlessly connect individual workflows – such as onboarding and credit underwriting – into a single configuration, offloading state management to Alloy while reducing friction for your end users. Our behind-the-scenes decisioning logic determines the best course of action and intelligently routes applicants to the appropriate decisioning path based on their behavior. This means fewer manual reviews for your agents and a seamless experience for your customers.
By using a holistic platform to assess risk, you can get the full picture of your customer — with onboarding and credit application information in one view — to simplify steps in the decisioning process and offer a frictionless customer experience. Imagine having a consolidated view of all customer assessments and decisions, with context for every bit of relevant information. That is what an identity and fraud prevention platform like Alloy has to offer.
Journeys are the future: Alloy introduces new multi-step application flows
When banks and fintechs take a non-traditional approach to credit decisions, they use alternative data sources across various workflows to create more comprehensive customer profiles.
Alternative data sources provide adjacent complementary signals — like rent history, utility bill payments, or secondary income from a gig job — that are not typically included in a credit report. Bank statements and tax returns, for instance, can reveal consistent repayment patterns on credit cards or evidence of assets, such as real estate, that strengthen an application. This data helps loan officers evaluate not just whether applicants will pay, but whether they can pay — a crucial distinction when determining appropriate loan amounts, loan terms, and pricing.
Instead of relying solely on the data provided by credit bureaus, Alloy supports alternative data sources through a single point of integration. This allows banks and fintechs to offer credit products to a larger number of people while continuing to minimize risk.
How neobank cred.ai is rethinking conventional credit decisioning
While different data sources provide diverse customer insights, banks and fintechs have traditionally taken a linear approach to data analysis and evaluation. They sequentially process the data without considering all the complex interactions at play between the data points.
However, data orchestration helps you adopt a non-linear approach to data. It involves running multiple data sources in tandem to create more complete customer profiles. Those alternative data sources can also be layered to take advantage of specific high-quality data — collected, curated, and delivered by specialized third-party vendors — that can be applied to a larger number of use cases.
Consumers Credit Union discovered that relying on a single data vendor left gaps in its ability to detect different types of fraud. By partnering with Alloy to orchestrate multiple data sources in a unified workflow, Consumers can now evaluate synthetic fraud, identity theft, and other fraud patterns simultaneously, creating a more complete picture of member risk while maintaining a seamless onboarding experience.
"A lot of data vendors are really good at one thing. Some specialize in identifying synthetic fraud, or they're really good at catching identity theft. But fraud comes in so many shapes and sizes. You have to look out for many different characteristics, and it's always changing. That's what I think the power of Alloy is: the ability to categorize all these different types of fraud, bring them into one workflow, and then evaluate those individual characteristics so you have a full picture of a member's risk."
– India Hoskins, Data & Analytics Manager at Consumers Credit Union
A proactive, holistic approach to credit decisioning makes all the difference when it comes to strengthening your customer retention. Alloy's identity and fraud prevention platform allows you to use third-party data, your own internal data — such as payment history — and historical data from previous decisions to monitor borrowers on an ongoing basis and paint a full picture of their financial health.
To make remarketing possible with Alloy, you can enroll existing customers in regular automated credit checks — scheduled at your preferred cadence — to routinely assess their creditworthiness and re-evaluate their risk level. This helps:
When you have the ability to easily monitor the health of your portfolio at scale, you never have to worry about missing out on opportunities to expand your services and tailor additional credit offerings to more of your existing customers.
Learn how Alloy Ongoing Monitoring can help you remarket your credit offerings
Earnest offers lending products that empower anyone seeking higher education to reduce the total price tag of their education and supercharge their ability to pay down student debt. Alloy helps Earnest assess applicants' creditworthiness — taking into account factors such as education, employment, and financial history, in addition to traditional credit scores — allowing them to provide instant decisions to more applicants, leading to a significantly higher conversion rate.
“It’s a challenging macro environment right now: inflation is affecting customers, consumer credit is rising, and the cost of education has never been higher. Students are stressed, and there’s a lot of confusion in the space. All these factors make it even more important to be able to give our applicants a decision right away. Quickly assessing the risk on customers and underwriting them accordingly is critically important to us.”
- Dave Moy, Credit Strategy and Portfolio Analytics Manager
Digital lending is very convenient, and borrowers love the fast and straightforward application process. However, the simplicity can also create opportunities for fraud.
Ultimately, your lending decision is only as good as the data it's based on. If you work off of false information, you are bound to make a riskier call. That is why your fraud and credit decisioning models should go hand in hand. A more complete picture of your customers’ identities can help you safeguard your organization — starting at the very beginning with onboarding.
Integrating identity risk management throughout the customer lifecycle gives you a combined perspective on credit, compliance, and fraud risks. Plus, it speeds up the credit decisioning process. Historically, some lenders have fallen prey to fraudulent borrowers because they respond reactively — after money has already been stolen. When lenders have a holistic solution for building a more complete picture of a borrower's creditworthiness and potential risks, they are much more likely to catch fraud before it is committed, rather than reacting once the money is already lost.
While fraud threats are evolving, customers still seek smooth, low-friction experiences. So, banks and fintechs need to adopt a nuanced strategy that prioritizes superior customer experience — without compromising on rigorous fraud prevention. This means deeply understanding your customers by analyzing authentication data, usage trends, and preferences. It's also crucial to be self-aware, which includes identifying your operational strengths and areas for improvement.
Coast aims to simplify payments and spending for the fleet industry. Thanks to Alloy, Coast has an end-to-end onboarding and credit underwriting solution that gets customers onboarded and underwritten in under five minutes.
“Without Alloy, we would need 6 people to process the same volume of credit applications that 1 person handles today.”
– Anurag Puranik, Head of Credit and Risk at Coast
Thanks to cutting-edge tech, there are ways to securely integrate onboarding and credit underwriting workflows, and analyze vast amounts of data that support lending decisions, without compromising the customer experience. Alloy is an identity and fraud prevention platform that allows you to manage all credit decisions end-to-end and automate ongoing credit checks.
Alloy stands out in its ability to seamlessly marry KYC, KYB, fraud detection, and credit underwriting by tapping into 250+ data solutions and fraud signals to ensure identity verification and fraud prevention are thorough – and happen simultaneously. In addition to standard credit bureau integrations, Alloy’s credit decisioning solution empowers lenders with alternative underwriting data, like cashflow attributes, to help them reach new customer segments.
Alloy's credit decisioning centralizes risk and identity processes to paint a fuller picture of applicants and support more inclusive offerings. For instance, an applicant with a thin credit file might seem risky, but cash flow data could reveal their potential as a reliable borrower. Meanwhile, Alloy’s Ongoing Monitoring capabilities offer a holistic understanding of each individual through automated, ongoing credit checks, enabling safer lending and better customer relationships.
There’s more. With Alloy, you can configure and customize workflows based on your credit policies. Most importantly, you can easily connect various workflows based on their results. Alloy streamlines the process for lenders and customers alike for a seamless transition from onboarding to credit decisioning.
Alloy partners with top global tech and data providers to give our clients the resources they need to manage fraud and risk workflows easily.