Consumer Debt Aggregators: Empowering Borrowers and Reshaping the Future of Lending

Amid the post-COVID economic reality of high interest rates, inflation and the end of the U.S. student loan repayment moratorium, financial stress is on the rise.

Consumer debt in the U.S. alone reached a record high of $17.5 trillion in 2023. Many consumers are thus seeking ways to better manage, consolidate and pay down their debts — presenting a massive new opportunity for fintechs and financial institutions to work together to help people refinance their loans and achieve their financial goals.

At Citi Ventures, we have been following this trend as it has begun to surge in the wake of the pandemic. Read on for our insights into this emerging space.

How consumer debt aggregators are revolutionizing debt management

Consumer debt comes in many forms — credit cards, mortgages, auto loans, etc. — and most consumers carry more than one type. These different debt lines are often held by different creditors with different account portals, interest rates, repayment schedules and more.

Historically, this has made it hard for consumers to manage or even grasp the full extent of their liabilities. Not only must they log into separate accounts to pay each loan every month, but lacking a holistic view into their financial situation they can struggle to keep up with payments and figure out how best to get out of debt (i.e., which loans to pay off first and when to prepay). They may also have a hard time consolidating/refinancing their loans, as the scattered nature of debt data often results in consumers receiving poorly targeted offers that they aren’t qualified for.

All that is changing with the rise of consumer debt aggregators (hereafter referred to as “CDAs”) like Spinwheel, Method and Payitoff. These API-based tools enable financial institutions to easily aggregate real-time, granular data on all of their prospective customers’ outstanding liabilities by simply entering their name, date of birth and phone number. By embedding themselves within financial institutions’ digital platforms, CDAs help their customers give their customers a unified view of their liabilities and offer them debt consolidation/refinancing products tailored to their particular circumstances.

How consumer debt aggregators benefit both borrowers and lenders

Through providing access to a consumer’s entire debt profile, CDAs help both borrowers and lenders seize new opportunities.

Consumer benefits include:

• Simplified debt management. The most immediate benefit CDAs offer consumers is ease in managing multiple debt accounts. In addition to allowing consumers to pay off all their debts through one portal, these tools also enable them to gather holistic insights into their liabilities, such as how much they owe each creditor and how much interest each loan is accruing.
• Personalized refinancing. CDAs also help consumers receive more targeted and accessible refinancing solutions. This feature is crucial, as most consumers who can benefit from refinancing are either unaware of these opportunities or unfamiliar with how to find offers they are qualified for. For instance, many consumers revolve their debts on high-interest credit cards when they may qualify for a low-interest home equity line of credit (HELOC) or personal loan.
• Improved financial literacy. Viewing all their debt and refinancing options in one place can help consumers develop a more informed approach to personal finance, which in turn can help them get out of cycles of debt and on the road to financial health.

Lender benefits include:

• Deeper customer relationships. The far-reaching insight that CDAs provide into a consumer’s debt profile can help lenders enhance their relationships with their customers and surface targeted products at the right moments, strengthening customer retention.
• Market expansion. These same insights also enable lenders to personalize their loan refinancing offers to an unprecedented degree. This can help them extend their market reach and improve their conversion rates, as potential customers who receive offers tailored to their debt needs are more likely to convert.
• Improved risk management. CDAs enable lenders to better understand the nature of the consumer’s liabilities, debt paydown habits and overall financial health. Lenders can then leverage these insights in the loan underwriting process to more accurately assess and price their credit risk — helping reduce losses and improve margins.