What lenders need to know about implementing cash flow underwriting in 2026

“... The emergence of open banking in the U.S. has created a once-in-a-generation opportunity to tear apart and rebuild the infrastructure that lenders rely on to make credit decisions,” according to Fintech Take’s Alex Johnson.

This is because consumer-permissioned financial data enables lenders to gain a more timely, accurate view of a prospective borrower’s cash flow history and habits. Instead of relying solely on traditional credit decisioning — aka the credit score, cash flow underwriting lets lenders use real-time transaction data (i.e., income, expenses, spending patterns, etc.) to determine if someone can repay a loan.

Cash flow underwriting is powered by open banking APIs that allow lenders to securely access financial data based on consumer consent. Open banking, and more broadly, open finance, creates a standardized, secure way for borrowers to share data with the banks, lenders, and other third-party financial providers that they use to see all of their financial accounts in one place, move money, apply for credit or loans, and manage their finances.

Today, more than 114 million customer connections are enabled by the Financial Data Exchange’s standardized API for secure, permissioned data sharing. And, this number continues to grow. In this post, we’ll dive into:

• The shift towards cash flow-based lending
• How cash flow underwriting works
• How to overcome key implementation challenges
• Understanding today’s U.S. open banking landscape
• The operational benefits of cash flow lending
• How LoanPro helps you launch and scale a modern lending program

The shift toward cash flow-based lending

The days of a single credit score determining a borrower’s credit worthiness are numbered. Why? Let’s look at today’s borrower reality:

Credit for the credit invisible: Forty-nine million U.S. consumers don't have conventional credit scores, including 28 million who have no mainstream credit file at the credit bureaus (likely because they never had credit before). And, another 21 million have some limited information in their mainstream credit file, but not enough to generate a conventional credit score. Traditional underwriting ignores these credit invisible Americans.

Supporting the growing gig economy: The gig economy employs approximately 15.5 million people or 10.2% of the labor force, according to a Bureau of Labor Statistics report. Traditional underwriting relies on steady W-2 income and long employment histories, which don't capture the variable, multi-stream earnings of gig workers. This means financially-capable gig workers may struggle to access credit because they don’t have regular pay stubs and predictable cash flow patterns.

When it comes to credit invisible and gig economy workers, traditional underwriting leaves significant amounts of money on the table for lenders. Cash flow underwriting provides a better way for modern lenders to evaluate a borrower’s ability to pay back a loan based on alternative credit data so they can drive better outcomes for their business and borrowers.

Leading lenders are already implementing this shift that balances speed, personalization, and risk management. For specific insight about cash flow underwriting transforming credit origination in the real world, watch this on-demand webinar:

How cash flow underwriting works in practice

So what is cash flow underwriting? Cash flow underwriting works by moving beyond a simple credit score to the bigger picture of a borrower’s real-time financial data to understand current financial behaviors like income, spending, and balances to better assess their actual ability to repay a loan.

Leveraging open banking and real-time transaction data

While cash flow-based lending isn’t a new concept, open banking has accelerated cash flow underwriting by automating the ability to create a more complete picture of a lender’s finances. Previously, cash flow underwriting was too time-consuming and expensive for most credit decisions. Now, it can be done more efficiently and automatically with consumer-permissioned open banking data.

Open banking enables consumers to grant permission to share their financial data from various bank accounts with third parties via open banking APIs. With open banking, lenders can see a more accurate customer profile with access to real-time, permissioned financial data from potential borrowers. Instead of relying on credit scores or manual uploads of bank statements, lenders can leverage automated, deeper financial health analysis — improving accuracy, speed, and financial inclusion by assessing a borrower’s true ability to pay.

The technology stack: From data collection to loan servicing

Now, the technology stack to support loan origination can be streamlined in many ways to drive better loan decisioning based on alternative credit data and automated credit decisioning. Here’s what that looks like in practice:

1. Data collection: Using open banking APIs, data collection is significantly simplified. Instead of asking consumers to manually upload bank statements to support credit reports, lenders can enable consumers to seamlessly and securely connect their bank accounts to create a more complete picture of their finances without manual work.
2. Data analysis, or underwriting: Once borrowers grant permission to securely share their bank account data through bank data aggregation, sophisticated algorithms can analyze transaction history to identify patterns in income deposits, spending habits, recurring expenses, and savings buffers. This gives lenders better insights into a borrower’s income stability, spending patterns, and payment history to more accurately assess their ability and willingness to repay a loan.
3. Credit decisioning: Credit decisioning uses the data analysis to approve or deny applications. Today’s modern credit providers leverage an integrated decisioning solution — such as LoanPro’s decisioning engine — to streamline loan approvals, improve accuracy, and keep data visible. Using LoanPro’s decisioning engine, lenders can cut down on their wait times without compromising accuracy or efficiency. With a modern decisioning engine like LoanPro, consumer-permissioned data is fed into adaptive AI models customized to the lender’s own business logic and product line, giving them a data-informed prediction of how the account will perform. At this point, the account can either be automatically approved or sent to an agent for manual review.
4. Loan funding: Once a credit decision has been made, the final step in the loan origination process is to distribute funds to the borrower so they can access ongoing credit (such as a credit card) or complete a major purchase. Once funding has been disbursed to the borrower, loan origination is complete and borrowers enter the loan servicing stage of their account.
5. Loan servicing: Loan servicing refers to the ongoing management activities that a lender performs throughout a loan's duration, from disbursing funds to collecting payments and closing the account. With cash flow servicing, lenders use the same real-time financial data from underwriting throughout the loan lifecycle for proactive account management instead of reactive monitoring. The best platforms streamline servicing through automation, agents, and borrower self-service tools. Legacy systems are rigid and require costly back-end coding for minor changes. LoanPro offers a flexible, API-first system built on a real-time ledger that manages all post-origination activity, from payments and interest accrual to customer support and collections.

Cash flow data vs. credit scores: Why you need both

At this point, many lenders may be asking if they even need credit scores for loan underwriting if cash flow-based lending is an option. The answer is yes. Credit scores and cash flow data should be viewed as complementary data sets that can help create a more complete picture of a potential borrower — particularly if that borrower has a thin credit file.

Traditional credit scores focus on past credit behavior, showing a borrower’s willingness to pay back loans and credit based on their payment history. On the other side, cash flow data provides lenders with real-time insights into a borrower's actual income, spending, and savings. This shows their ability to pay, not just their willingness to pay.

Overcoming implementation challenges

Implementing cash flow underwriting means moving from static, historical credit scores and data to real-time analysis of consumer-permissioned banking data. For traditional lending platforms, shifting to cash flow-based lending can involve a few common challenges, including:

Data integration: Perhaps one of the biggest challenges is integrating new data sources into existing loan origination systems. Lenders need technology that can handle real-time data analysis and ensure data security.

Borrower hesitancy to share data: Cash flow underwriting only works if borrowers are willing to share their bank data with lenders. The good news is a large majority of consumers are willing to share and are already doing so. Lenders can help hesitant borrowers get comfortable with bank data aggregation by emphasizing data security and the value borrowers will gain.

Servicing complexities: Cash flow servicing transforms how lenders manage accounts post-origination. With ongoing access to real-time transaction data, lenders can spot income disruptions before they result in delinquency. This shift from reactive monitoring to proactive account management enables timely interventions, like payment flexibility or modified terms, that increase retention.

Regulatory uncertainty on open banking: Finally, regulatory and compliance requirements for open banking in the United States remain in a state of flux. While open banking has broad market adoption across the country, continued regulatory uncertainty has pushed many financial industry players into a state of limbo. The key here is not to wait for regulatory guidance. Open banking is already here and already in use to fuel cash flow-based lending.

Understanding today’s U.S. open banking landscape

In the United States, Section 1033 of the Dodd-Frank Act activates dormant legal authority that the Consumer Financial Protection Bureau (CFPB) has held since 2010 to accelerate open banking and create a personal financial data rights rule to protect consumers and their financial data.

The CFPB finalized its Section 1033 Open Banking Rule in October 2024, outlining compliance requirements and timelines for financial data providers and data recipients dealing with checking and savings accounts, digital wallets, credit cards, and payment facilitation products.

However, a few months after the final rule was issued, it was challenged in court. By May 2025, a federal judge issued a preliminary injunction, pausing the rule’s implementation. This caused the CFPB to announce it would revisit the rule and to issue a new Advanced Notice of Proposed Rulemaking to get new feedback from the industry over the summer.

Now, the industry is awaiting a new ‘interim’ final Section 1033 rule that was promised before the end of 2025. We’re still waiting.

As we await next steps from the CFPB, market demand will continue to push open banking forward. Lenders have tremendous opportunity to move ahead with cash flow underwriting to drive better outcomes for their business and borrowers.

The operational benefit: Scalability and reduced credit risk

Now that we’ve spent time outlining the challenges of cash flow-based lending, let’s talk about the biggest operational benefits: enabling greater operational efficiency and driving meaningful growth.

Enabling greater operational efficiency: Cash flow underwriting helps lenders significantly boost operational efficiency by enabling them to:

• Automate faster, more accurate lending decisions, replacing the need for slow, manual reviews.
• Improve risk assessments by analyzing actual financial behavior rather than relying on credit scores.
• Speed up loan processing and funding at scale to support business growth.

Driving meaningful growth: With real-time, consumer-permissioned banking data to evaluate creditworthiness, financial institutions and modern lenders can:

• Expand their customer base by allowing them to confidently and safely approve additional borrowers who may not have been approved previously. For instance, this includes credit invisible or thin file consumers, gig workers without consistent documentation, and small businesses with limited credit history.
• Reduce default risks by gaining more accurate pictures of a borrower's financial health and ability to pay back a loan. Cash flow servicing extends this advantage throughout the loan lifecycle, enabling early intervention when financial stress emerges.
• Decrease fraud by using real-time data to verify a borrower’s identity and income and spot fraudulent applications faster.
• Create more personalized products, such as dynamic credit line increases, tailored payment plans, and more.

For a deeper look at how cash flow data is reshaping credit operations, tune in to this podcast with Experian's SVP Triane Chang. She discusses Experian's partnership with Plaid, the evolution of cash-flow analytics, and consumer empowerment:

Launch and scale your modern lending program with LoanPro

LoanPro offers a next-generation architecture and configuration-first platform that can help you unlock new efficiencies and growth with cash flow underwriting. Our modern lending platform was built with centralized data visibility in mind — providing real-time access to all of your data in a single source of truth.

If you’re ready to see how cash flow underwriting can unlock meaningful growth and operational efficiency for your business, request a demo today.