By Roy Urrico
New York City based Bloom Credit, an application programming interface (API) platform designed to modernize the credit data ecosystem infrastructure, announced the introduction of Bloom+, which allows alternative consumer permissioned data (CPD) to help build credit profiles. The $355 million Newtown, Penn. Inspire Federal Credit Union is the first Bloom+ client.
Bloom Credit’s platform provides APIs for data access (credit inquiries) and furnishment (credit reporting). The furnishment APIs also support CPD and provides the foundation for turnkey financial inclusion solutions for credit unions and banks.
Bloom+ allows financial institutions to offer accountholders the ability to report alternative credit scoring data from their primary checking accounts. “Banks and credit unions want to help their customers to build better financial health. If you are making regular bill payments on time, you should be able to leverage that data to initiate or build your credit profile,” said Christian Widhalm, CEO of Bloom Credit.
“We’re pleased to introduce Bloom+, which provides the bridge between a customers’ bill payment history and getting that data, accurately, to the credit bureaus,” added Widhalm. TransUnion, one of the three major credit bureaus, collaborated with Bloom Credit to be the initial receiver of the Bloom+ data.
Lenders are increasingly receptive to using alternative data, such as regular utility payments, as a measure of creditworthiness. “Today, more than ever, the communities we serve need access to affordable credit," said Jim Merrill, CEO of Inspire FCU. "Bloom+ gives our members and the communities we serve the critical ability to demonstrate their creditworthiness in new ways.”
Widhalm discussed the significance of using alternative CPD – such as buy now, pay later (BNPL) – in an individual’s credit history with Finopotamus.
Bloom+ Gives Credit Where Due
More than 45 million consumers are either credit unserved or underserved, according to a TransUnion study – Empowering Credit Inclusion: A Deeper Perspective on Credit Underserved and Unserved Consumers. Widhalm refers to these individuals as “credit invisible,” with little or no credit history and who may experience higher borrowing costs because they cannot access mainstream credit rates or products.
Bloom+ originates anywhere a credit union or bank wants to engage with their members / customers, allowing them to connect their primary account and to choose the types of payments they want to use to build credit including rent, utilities, telecommunications and BNPL plans. Bloom+ verifies these payments and furnishes them to the credit bureaus where they end up on the consumer’s core credit file. By serving their customers’ best interests and creating trust, credit unions and banks can improve deposit retention and increase lending opportunities.
For Bloom+, “We have built a user interface (UI) that is white labeled and branded for (the credit union) within 24 hours of signing,” said Widhalm. “We give them that link, they put it within their online banking/digital banking experience. They can put it in a text message, they can put it in an email, they can put it in a QR code on tri-fold statement stuffers, branch collateral.”
Fulfilling a Need
"The current credit data ecosystem is broken. With our platform and latest innovation, we are helping our customers and partners to access and use accurate, permissioned data to enrich a consumer’s credit history while reducing lending risks,” Widhalm continued. “We thank our peers in the industry for recognizing the important work Bloom Credit is doing to reimagine and transform the data, infrastructure and technology powering credit access and decisions.".
“At TransUnion, we know that consumers want to play a more active role in their financial journeys. The consumer permissioned data reporting that Bloom+ enables, provides a more holistic view into financial obligations millions of consumers meet every month and may not be reflected in traditional credit data. It’s a huge step forward in driving more confident lending and empowering consumers,” said David Goldberg, senior vice president at TransUnion, in the Bloom+ announcement.
Widhalm further explained as the financial landscape evolves, traditional credit reporting methods are proving insufficient for a complete and accurate assessment of consumer creditworthiness. The surge in BNPL services and other alternative lending products presents new complexities, making it crucial for the lending and credit ecosystem to pursue and receive all relevant data to benefit consumers and lenders, he noted.
Lenders today often lack crucial insights into consumers’ financial lives, according to Widhalm. Traditional credit reports fail to capture the full spectrum of financial obligations. This incomplete picture can lead to misguided lending decisions. In addition to pulling data from the primary banking account, Bloom+ can also pull data from external accounts.
Widhalm also noted that a consumer might not appear creditworthy based on traditional metrics, even though they have a lengthy track record of making on-time payments on things like rent, telco, utilities, and installment purchases. The absence of this information in credit reports means lenders cannot accurately assess risk, excluding a large number of consumers who have thin or no credit files.
Technical Challenges
Integrating BNPL data into existing credit reporting frameworks is complex, maintained Widhalm. Traditional credit scoring models, for example, were not designed to handle the high frequency and low dollar value of BNPL transactions. “The issue is that the rails designed for this traditional data is an old format governed by (the Consumer Data Industry Association) called Metro 2, which was never designed to actually take in alternative types of data, which is what we have been seeing today. There has been a convergence of alternative data being used in credit decisions.”
Widhalm explained, “What we created is an agnostic rail that is bidirectional between the major credit bureaus and our clients. So, clients can pull data through a single API.”
He believes by standardizing reporting practices, the industry can ensure that all relevant financial data is included in credit reports, providing a more accurate picture of consumer creditworthiness. Widhalm said comprehensive data reporting helps mitigate the risks associated with unreported obligations, reducing the likelihood of default and financial instability.
Helping FIs Engage New Members
“A lot of the credit unions and the banks have been trying to figure out how do we actually engage and find our next generation of customers and how do we start engaging people with new and innovative products that actually meet the needs of today,” Widhalm suggested.
Widhalm noted Bloom+ can benefit financial institutions towards information governance because it creates what he defines as a “regulatory halo effect.” He said, “If you think about credit unions, it is perfect for them. They are so member focused, they are in on financial wellness, and the NCUA is asking, ‘What are you doing for your members? What are you doing to actually help promote financial inclusion?’”
Helping member’ financial wellness can help the credit union long-term as well. “(Bloom+) is a product that actually helps attract new deposits. It acts as a bridge to having a more lifelong relationship, with the member,” said Widhalm. He explained putting accurate and quality data into the system helps lenders assess credit risk. “It is obviously good for the consumer, but it is also good for the bureaus to have more data in a high-quality way.”
Bloom recently won “Best of Show” at FinovateSpring 2024 for Bloom+. Finovate recognized Bloom for its demonstration of a product aimed at bringing mainstream credit to the masses through a unique, white label credit enrichment program that incorporates alternative data to determine consumer credit worthiness.