Plaid is a leader in open banking, building the technology that powers thousands of financial applications and services used by millions of Americans every day to better manage their finances. Last year, Plaid launched its own Consumer Reporting Agency, Plaid Check, which leverages cash flow information and data-driven insights to help lenders expand responsible credit access. Plaid credit products are used by companies like SoFi, Zillow Home Loans, BMG Money, Rocket Mortgage, Affirm, and more to improve the lending process.
Rich Franks is the Head of Credit at Plaid, where he brings deep quantitative expertise and a passion for building data-driven credit solutions that make lending faster, fairer, and more accessible. Rich has spent over 20 years in financial services and technology. He previously served as Global Head of Credit Strategy at PayPal and led Credit Karma’s Lightbox product, after holding senior roles at Commonwealth Bank and Capital One. Rich earned his MBA from The Wharton School and a BS in Industrial & Systems Engineering from Georgia Tech. Rich lives in Berkeley, CA with his wife, where they enjoy hiking, working out, and anything active. He is an amateur guitar player and avid traveler and has visited more than 50 countries.
Q: To start, could you tell us a bit about your background, what drew you to Plaid, and how the company’s mission to unlock financial freedom through technology guides your work?
A: I’ve been in the industry for over 20 years and have a passion for building credit solutions that make lending faster, fairer, and more accessible. Prior to my role at Plaid, I served as Global Head of Credit Strategy at PayPal and led Credit Karma’s Lightbox product, after holding senior roles at the Commonwealth Bank of Australia and Capital One.
I was attracted to Plaid because of its unique role at the center of the financial services ecosystem, powering thousands of digital finance tools that Americans rely on. As part of this, Plaid sits at the forefront of cash flow underwriting, making financial data available for hundreds of lending use cases from auto lending, to personal loans, to mortgage and more.
Last year, Plaid stood up a new consumer reporting agency focused on expanding access to cash flow data and analytics for lenders of all sizes. That’s quite the feat. The team here is focused on building innovative products for more open, transparent consumer lending.
Q: Historically, credit reporting has excluded or disadvantaged many consumers and small businesses. What’s next for ensuring cash flow underwriting becomes a mainstream part of credit decisioning?
A: That’s right – today’s credit system relies on technology and systems that are decades old. The way our current system works requires borrowers to have credit in order to get credit. Millions of Americans are left outside of the traditional credit lens, and lenders are forced to make decisions with stale or incomplete data.
A decade ago, lenders were just starting to explore cash flow insights. Today, if you are a lender who is not using cash flow data, you are behind.
In today’s economy, traditional credit scoring is only part of the picture, especially for gig workers, young people, or those who are newer to the country. Lenders across the ecosystem see cash flow underwriting as a way to enhance accuracy and fairness, and provide a more current, holistic view of a borrower’s financial health and risk profile, especially for thin file borrowers. It is not just a driver for access and inclusion – it is a business imperative. We see these same benefits carry over in the small business lending context as well.
Q: As we think about building a fairer, more modern credit system, how is Plaid working to leverage data and technology to modernize credit and create a more inclusive, accessible system?
A: This week, we launched Plaid’s first credit score – LendScore – a credit risk score built on real-time cash flow data and insights on how a consumer is managing their money across financial apps and tools. We built LendScore to complement traditional credit scores by bringing in real-time data on a person’s financial behaviors, like income and repayment patterns, as well as unique insights on the financial apps consumers are using that can help lenders fill gaps.
For instance, consumers are using an average of 3-4 fintech apps. If one of those apps is a wealth management app, it can be a signal for stronger financial behavior. If we consider patterns across consumers using these tools, we see signals for reduced credit risk. Multiply this type of insight across our network of apps and services, and we can help lenders fill in meaningful gaps in consumers’ financial behavior.
Importantly, when people connect to services or choose to share this information via Plaid, we make the connection in a way that always puts the consumer in control of what data is shared and provides a layer of security.
We’ve seen growing interest from across the industry. As our reach grows, we can help ensure the best outcomes for decisioning for lenders and open doors for consumers.
Q: What are the biggest challenges and opportunities when it comes to aligning industry innovation with regulatory expectations in credit reporting and lending?
A: First, open banking is an enabler for cash flow data. In order to make this all happen, consumers must have the right to securely access and share their financial information. An open banking framework that reaffirms this right is critical to the credit system of the future – one that is more data driven and accessible.
We are extremely encouraged by policymakers’ embrace of cash flow data in lending. There is general recognition that this can drive tremendous benefits for consumers and businesses – from making home buying more accessible to buying a car and more. We were happy to see the introduction of bipartisan legislation recently by Congresswoman Young Kim and Janelle Bynum that would look more deeply at aspects of cash flow, expanding credit access.
The second is trust. If we want to build the credit system of the future, we need consumers to be able to trust in and use products where they know they are protected and in control of their data. Continuing to educate policymakers can help foster the trust that is integral to continued adoption and realizing these benefits for consumers and industry. We appreciate FTA’s leadership in paving the way for these important conversations.
Q: What fintech innovation do you personally wish existed today to make your life easier?
A: Applying for a mortgage is an incredibly cumbersome process, no matter how organized or diligent you are as a borrower. I could imagine more seamless lending applications where the verification process is digital, right up front. Some companies are beginning to do this, but I’d love to see further expansion so that automated income verification is the norm. We live in a time where 90% of homebuyers want more or fully digital mortgage processes. That’s because we all crave faster, easier experiences that will alleviate manual errors and strengthen fraud protection. Not to mention the headache for consumers.
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