Empirical Research Findings
Report Summary
The Empirical Research Findings report provides a detailed summary of our applied research based on data from six non-bank financial services providers – Accion, Brigit, Kabbage, LendUp, Oportun, and Petal – that have begun using cash-flow variables and scores in an effort to increase the provision of credit to consumers and small businesses who may have difficulty obtaining loans from traditional sources.
FinRegLab retained Charles River Associates to help us design and conduct an independent analysis of the predictiveness of the participants’ cash-flow variables and scores based on actual loan performance. We also compared the predictiveness of the cash-flow metrics to traditional scores and variables, as well as to combined models using both types of information.
Where data permitted, we also analyzed the extent to which the research participants are providing credit to traditionally underserved populations and whether the use of the cash-flow variables and scores introduces fair lending risk in credit eligibility determinations.
Download the Empirical Research Findings hereDownload the fact sheet hereAcknowledgments
FinRegLab was established with generous support from Flourish. Flourish also supported FinRegLab’s evaluation of cash-flow data in consumer and small business credit underwriting and this summary report, The Use of Cash-Flow Data in Underwriting Credit: Empirical Research Findings.
Flourish is an evergreen, early-stage venture fund investing globally in entrepreneurs whose innovations help people achieve financial health and prosperity. Spun out of Omidyar Network in 2019 with an existing portfolio of $200 million, Flourish received a new commitment of $300 million from Pam and Pierre Omidyar, the founder of eBay. Flourish invests in a number of themes in fintech, insurtech, regtech and other technologies, as well as supports nonprofit organizations, that empower people and help foster a fair, more inclusive economy. Flourish is managed by a global team with offices in Silicon Valley, Washington DC, London, and India.
For more information visit www.flourishventures.com or join our community through Twitter, LinkedIn, Instagram, and Medium.
Additional support for this report was provided by the Milken Institute, which enabled FinRegLab to evaluate cash-flow data in small business credit underwriting.
Milken is a nonprofit, nonpartisan think tank that helps people build meaningful lives, in which they can experience health and well-being, pursue effective education and gainful employment, and access the resources required to create ever-expanding opportunities for themselves and their broader communities.
We are particularly grateful to Marsha Courchane and Arthur Baines, Charles River Associates, for their counsel in developing the research design, data analysis, and reporting of the research results. We are also grateful to Thomas P. Brown, Paul Hastings, for legal assistance throughout the course of the research process.
We would also like to acknowledge the FinRegLab team who worked on the research and the report(s). They include: Jennifer Chasseur, Kelly Thompson Cochran, Sarada Dhulipala, Aaron Milner, Stephen Stolzenberg, and Jared Yee.