Writer: Eric Bank
Editor: Lillian Guevara-Castro
Reviewer: Adam West
Key Takeaways
- Nova Credit raised $35 million in funding led by Socium Ventures to expand its cash flow underwriting platform.
- Nova’s partnerships with Chase, PayPal, and Mastercard demonstrate the shift toward real-time financial data.
- Cash flow underwriting uses banking data to help borrowers with thin or weak credit.
Nova Credit raised $35 million in funding to expand its cash flow underwriting platform and help lenders judge a borrower’s ability to repay by supplementing credit scores and files.
The funding, led by Socium Ventures and backed by Cox Enterprises, will further help Nova analyze up-to-the-minute income and spending data to assess a borrower’s financial health.
This data is normally not available from credit bureaus, although recent changes by Equifax and Experian provide some additional information. Nova’s approach gives lenders more ways to qualify overlooked borrowers.
Cash flow underwriting is an increasingly popular tool for lenders looking to increase originations among marginal borrowers.
“We’re in the middle of a transformation in how financial institutions and rental housing operators enable credit decisioning,” said Misha Esipov, Co-Founder and CEO of Nova Credit. “Traditional credit bureau data fundamentally misses so much about a consumer’s financial health that it is proving insufficient for today’s dynamic market.”
He continued, “Cash flow underwriting provides the clarity lenders and property managers need to grow responsibly while serving consumers who’ve been historically misunderstood by legacy systems.”
“This Series D enables us to further accelerate our build out of the Nova Credit Platform — comprehensive infrastructure, analytics, and FCRA compliance that makes real-time financial data as accessible and reliable as traditional credit data.”
Chase, PayPal, and Mastercard Back Alternative Data Models
Nova’s partnerships with Chase, PayPal, and Mastercard show the demand for broader borrower data. These companies use Nova’s Cash Atlas and Credit Passport tools to gauge risk. The former supports cash flow underwriting. The latter provides international credit information.
“Chase is committed to being the bank for all, and tools like Cash Atlas and Credit Passport will help with this mission by giving us a more comprehensive view into each individual and their credit needs,” said Chris Reagan, president of Chase Branded Cards.
“With this new data source, we can better assess credit risk, make more informed lending decisions, and approve customers with right-sized lines of credit.”
Paypal uses Cash Atlas for BNPL underwriting, said Ratinder Bedi, SVP, Global Chief Credit Officer at PayPal. “Nova Credit’s Cash Atlas enables us to responsibly incorporate cash flow data and expand credit access without compromising our commitment to consumer financial health.”
Nova uses Mastercard’s banking network, which provides real-time banking data for 95% of U.S. deposit accounts. This helps lenders make faster and more inclusive decisions.
Why Cash Flow Underwriting Matters for Subprime Lenders
Small lenders and fintechs are able to compete better against the big players by using Nova’s platform. Nova also helps lenders achieve compliance with applicable regulations, filling the gaps left by FICO-based systems.
Cash flow underwriting gives lenders access to consumer-permissioned data from banks, payroll systems, and other verified sources. This information enables lenders to increase originations and keep an eye on customer activity.
