This is your weekly update on what’s breaking (and fixing) modern lending.

Three insights. Three minutes. Zero fluff. 

Synthetic Income: The Perfect Crime?

A new fraud is fooling every document verification system: circular income transactions. Fraudsters inflate their income by moving money through Venmo, Cash App, then back out again - creating real transactions on real bank statements that look like recurring deposits.

One auto lender caught borrowers cycling $5,000 through peer-to-peer apps just before statement periods, then immediately transferring it back out. While this example came from auto lending, the same technique works in any loan application where income verification matters - from SMB loans to credit cards.

👻 The scary part? 
Automated income verification tools can’t detect the timing and reversals. These are legitimate transactions on mainstream platforms - which is exactly why they slip past traditional checks.

🚨 The real problem? 
Traditional fraud detection analyzes documents, not behaviors. Document scans see what’s on the page - not how the income got there.

⚡ Action step:
Look beyond document content to document behavior. Ask: When was it uploaded? How long did the applicant spend on that page? Do deposits appear right before each statement, then vanish? These behavioral signals catch what document scanning always misses.

Behavioral Insight: Why Loan Fear Stalls Applications

A loan officer described a frustrating pattern: business owners who urgently need financing drag out document submission over weeks. The process takes too long, momentum slips away - and deals stall

💡 The psychology? 
These aren’t disorganized people — the issue is financial document avoidance. Just like avoiding the dentist, borrowers delay paperwork because it triggers anxiety about judgment, compliance, or financial reality. Even confident business owners aren’t immune to this kind of cognitive avoidance.

🚨 The real problem? 
Asking for every document at once creates cognitive overload. Overwhelmed borrowers stall, break tasks into pieces, and delay — the opposite of what institutions need.

⚡ Action step:
Instead of handing out a long document list, break requests into 3–4 stages with clear deadlines and visible progress.

🔍Want to go deeper?
Behavioral research shows that when nonprofit lender Merit America redesigned its loan paperwork journey this way, completion rates doubled.

Chunking reduces anxiety, shortens timelines, and builds trust between borrower and institution.

Fintech Watch: Data Access Fee Debate Hits the
White House

Open banking just got political - and the outcome could reshape how community institutions access and afford the tools their borrowers rely on.

🏛️ What’s going on?:
Last month, CNBC reported that JPMorgan plans to charge Plaid $300M annually for access to customer bank data - a defensive play against fast-growing fintechs that rattled stocks across the sector (click image below to watch video).

On Thursday, August 14, more than 80 CEOs urged the White House to block the fees, calling them “anti-competitive” and warning they could stifle innovation in AI, digital wallets, and crypto. Their argument: consumers, not banks, own their financial data. Banking groups pushed back, arguing banks invest billions in secure infrastructure and shouldn’t be required to provide services to competitors for free.

⚠️ Why it Matters: 
If these fees take effect as early as September, costs will ripple from data aggregators to fintechs - and eventually to community banks, credit unions, and their customers. But the bigger risk isn’t just higher costs. As large banks double down on infrastructure and fintechs compete on speed, community institutions have a chance to stand out by leaning into what they do best: trusted relationships.

⚡Action Step:
Don’t wait on Washington. Review your fintech partnerships now. Ask how rising API costs could impact your institution, and focus investments on strategies that keep you front and center with customers. Relationship-building skills - supported by the right tech - remain your strongest competitive edge.

🙌 Help Us Grow

Know someone in lending who’d benefit from these insights? Forward this to them - and hit reply if there’s a topic you want us to cover.

📅 Next newsletter drops Tuesday, 08/26. And we’ll talk about:

• Synthetic Fraud: Why Detection Needs to Go Beyond Onboarding

• Behavioral Science: Beyond Data - Why Behavioral Psychology Matters

Our Fintech Watch section is still in the works - which topic would you like to see us feature?