By Zachary Ehrlich  Mon May 7, 2012

Yodlee Wants to Shake Up Finance, Introduce Alternate Credit Score

Yodlee Interactive, which developed the systems used by hundreds of financial institutions to power online banking, is opening its data and security platform to crowdsource innovation. Yodlee’s partnership with early adopters miiCard and MyRewardsTree has already been made public, and they represent just how vast Yodlee hopes the projects will get.

Yodlee announced Accelerator and Incubator programs in hopes of dramatically accelerating digital financial innovation. In a phone interview, Chief Strategy Officer Joe Polverari explained how the changing industry enables Yodlee to expand into non-PFM (personal-financial management) solutions, such as coupons, rewards, lending, underwriting and even accounting — and what that means for Yodlee.

“One of the things we found out was that entrepreneurs don’t necessarily want a formal structure,” he said. “They just want the ability to innovate.”

And that is how Yodlee came to work on miiCard and MyRewardsTree, which may not fit exactly into Yodlee’s current portfolio but expand the company’s reach into new solutions for consumers.

Moving beyond FinApps

With most of the top 50 banks using a version of Yodlee’s platform, the privately held company securely powers almost every online banking transaction in the United States. This infrastructure led to the creation of FinApps, or financial apps whereby developers design what they want to see in a PFM powered by Yodlee. It can then be introduced to banks who brand it and send it out to consumers.

Yodlee Accelerator, which will give access to Yodlee’s financial cloud, and Incubator, which provides even more support including personal development assistance, will complement FinApps. Companies can now have even more control over what they would like to design — unbound by the PFM label and with streamlined access to data, payments and digital security. Both are currently open to applicants.

Leading the way – away from PFM

miiCard has been called a “digital passport” because of its enhanced security. Instead of relying on emails and passwords (or security questions), your transaction history essentially becomes your identity, which is extremely hard to fake or manipulate for identity-theft purposes. Since your miiCard is backed by your bank, others can feel secure you are who you say, whether you’re opening an account or trying out online dating. MyRewardsTree tracks your rewards online and maximizes their potential on the basis that 30 to 35 percent of all rewards benefits fall through the cracks.

I spoke with Polverari last July when Yodlee hit the 30 million user mark (the company has now swelled to over 35 million), and he introduced me to the concept of an “alternative credit score” for people with money and jobs, but no credit. With the ability to track spending and bill payments as well as income and assets, traditional credit scores could be replaced by this data. Your transaction history and income can determine how likely you are to pay back a loan.

He hopes that at least some of the approximately 25 to 30 percent of people who apply for loans with bad or no credit will now have a second chance. With the introduction of the two programs, “already 6-10 companies are working on making the alternative credit score a reality,” he said. “If the alternative credit score becomes more mainstream, this will drastically alter the way we approach loans, credit cards and even financial institutions as a whole.”

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