Plaid launched LendScore 2 on Tuesday, an updated iteration of its AI-powered credit-scoring product designed to equip lenders with deeper insight into prospective borrowers.
The product builds on LendScore, which Plaid released last October. That tool draws on cashflow data — factors such as a person's savings balance and bill-payment history — to assess the probability that a borrower will repay a loan. Lenders can use it as a supplement to, or a replacement for, traditional credit metrics such as the FICO score.
"Traditional credit data looks at your willingness to repay. Cashflow data looks at your ability to repay," Plaid credit product lead Michelle Young said, according to The Wall Street Journal. "These signals together give lenders a more holistic view to actually make a decision."
LendScore 2 aims to sharpen that prediction, reducing the rate at which lenders misjudge whether a borrower will default. The new version includes specialized models for auto and home lending, as well as a short-term lending model aimed at companies including buy now, pay later providers.
Plaid is also introducing LendScore Arc, an AI-driven model that analyzes the sequence and timing of a borrower's transaction history to gauge repayment capacity and flag delinquency risk.
The specialized models are meant to broaden Plaid's customer base by giving hesitant lenders a more familiar entry point into cashflow-based underwriting, the company said. So far, Plaid said it has seen the most interest from fintech lenders, who tend to be more willing to try new tools, as well as consumer lenders whose loans are not backed by collateral.
The tools could also open up lending to borrowers who lack established credit histories, using cashflow data as an alternative basis for evaluating their applications.
Chief Executive Zach Perret framed the credit-scoring expansion as part of a broader push beyond Plaid's core business of connecting consumers' bank accounts with financial apps such as Robinhood and Venmo. "For our phase two, we started thinking about what are the areas where we can really make the product quality a lot better," Perret said. "One big one for us was in credit score."
Perret said he expects to announce additional new products in the near future, with some potentially arriving this fall. Plaid is also developing products related to payments and has a growing anti-fraud business, the company said. Plaid's finance chief said earlier this year that the company is preparing to go public.
"My hope is that we're partnering with people on most credit decisions in five years," Perret said.
