The Credit-Building Pathway: Banking's Opportunity for a Fresh Approach

Building borrowing power is a problem for millions of Americans with limited or damaged credit histories. The banking industry’s traditional answer is to educate customers generically, equip them with credit scores and do-it-yourself credit-building tools, and sell them a secured card with no follow-up. Seeing opportunity, fintechs and neobanks are targeting the market with innovative credit-building products and apps. But what remains largely missing are products and services that will keep customers on course to strengthen their credit histories and ultimately grant them access to credit.

In this report, Javelin Strategy & Research introduces its credit-building framework, consisting of three ascending stages of support for credit-seeking individuals. The report also examines five categories of fintech innovation that traditional financial institutions have not tried: delayed debit and charge cards; credit-builder loans, cash scores; online bill payment and reporting services, and rent-reporting services. Traditional FIs have the potential to lead the credit-building sector, but it will require new approaches to build credit, transparency and personalized guidance-rich features, and a commitment to lend to “graduates.”

Key questions discussed in this report:

• What is the construct of the Javelin credit-building pathway?
• Where do banks, credit unions, fintechs, and neobanks stand on this pathway?
• What new credit-building solutions are fintechs and neobanks offering?  
• What are the best practices from fintechs and neobanks?
• What types of personalized information would benefit credit seekers?
• Do banks and credit unions have a shot at this market, or is it too late?
   

Companies Mentioned:

Bank of America, Boom, Brigit, Capital One, Chase, Chime, Citibank, Credit.Ai, Credit Karma, CreditStrong, Current, eCredableLift, Experian, Extra, Grow Credit, Intuit, Level, MoneyLion, Petal, Piñata, Plaid, PNC, Republic Bank, Sable, Self, Sesame Cash, StellarFI, Sunrise Banks, TransUnion, Tomo, Truist, US Bank, Varo, Wells Fargo