The current financial system is inhibiting consumers’ access to the best possible financial products for them and preventing banks and fintechs from helping the full spectrum of the population.
To better understand the financial system that today’s consumer lives in, Pinwheel polled 2,000 working adults (over 18) in America with a mix of credit scores, household incomes, and types of employment.
Across the board, consumers are aware that they’re not getting a fair shake because the credit scoring system and lending models misrepresent how truly financially responsible they are:
- 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.
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.
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.
What does this mean? There’s a huge percentage of the population that are excellent candidates for various lending products –ranging from traditional mortgages to dynamic lending (terms can be altered proactively based on your most updated financial situation) to earned wage access (EWA) – who can’t or won’t turn to the financial system. This is likely because they are scared of potentially being denied or only being offered high-interest options.
Consumers deserve and expect more from their banks and fintechs; those that can’t provide better options will rightfully lose customers.
Consumers are losing faith that their primary financial relationships, particularly banks, can meet their needs. Only 27% feel banks provide superior access to fairer financial products when compared with fintechs.
Most consumers are willing to be evaluated more holistically, but legacy evaluation precedents in lending are missing critical information about peoples’ financial pictures. The next era of great fintech innovation must focus on increasing financial equality through the innovation of tools and services that can help consumers live their best financial lives.
Interested in reviewing the full report? Check back next month to read the Pinwheel report, Beyond the credit score: Propelling consumer finance into the future with income data.
What topics can you expect to be covered in the full-length survey?
- How current credit scoring models are impacting consumers
- What new tools and services do consumers want most from banks and fintechs
- Consumers' attitudes towards financial data sharing
- What parts of the FICO score model do consumers find damaging to how their financial responsibility is depicted
- An overview of demographics of consumers being underserved by banks and fintechs