How Atomic uses payroll data to unlock opportunities for banks, fintechs and their customers

If a bank or a fintech company wants to extend a loan to a consumer, chances are they’re probably looking at information that is living within a pay stub.

The idea of using paycheck data to access financial products and services has been around for a while – back in 2019, CB Insights research pointed towards the trend of fintechs “unbundling the paycheck” in order to help consumers combat debt or payday lending, and give them more choices to improve their financial health.

But banks aren’t really able to do this on their own, according to Lindsay Davis, head of markets at Atomic.

"Connecting to payroll systems is incredibly messy – it's not just one connection and done, you have to connect into potentially thousands of systems. It’s a burden for a bank to ask their best engineers to maintain this when they have to keep up with their other systems," she said.

Speaking at Tearsheet’s DataDay Conference, Davis argued that financial providers lack the means to connect to a consumer’s payroll data, mostly relying on the consumer to do most of the leg work. 

However, it’s a cumbersome approach to ask consumers to take pictures of their pay stub or submit physical documentation in order for the financial provider to connect to their payroll system.

Through Atomic, financial services providers can easily identify consumers as the fintech connects to over 450 different payroll systems and thousands of employers, allowing for a single point of connectivity between everyone involved in this process.

For example, measuring a consumer’s income is either done through aggregated data across different bank accounts, or relying on the consumer to provide the information in an honest manner. 

But by using pay stubs, lenders can figure out not just income data, but also what type of worker they are, Davis argued. More detailed information can be used, such as if they're an hourly worker connecting into time and attendance data, or if they are contributing to a 401k, for example.

One of the first use cases Atomic honed in on was direct deposit acquisition – the ability for a consumer to log into the account and set up their direct deposit and move either a percentage of their paycheck or a fixed amount of money.

Direct deposits are especially important as every lender relies on deposits as a primary source of funds. Plus, there's also interchange revenue to be made through debit card transactions. 

"I think that a lot of the banks that we've been working with have realized that in a scenario where they can't physically acquire the customer via their bank branches anymore, their consumer is largely now digital-first or engaging with the digital portals. This is really that last bastion that has yet to be digitized,” Davis told the audience.

Among Atomic's first customers were some of the largest neobanks in the market today. Since then, the company went after verification of income and employment as a nice logical add-on. 

But the hardest thing to do was to create and maintain that connection to the payroll system, “because you're not just reading data, you're also writing into systems,” Davis said.

This works in favor of the consumer as well, as they can access more tailored experiences through smarter use of their paycheck data. 

The future for Atomic lies in enabling consumers to get paid when and how they want to be paid, while empowering them to use their financial data effectively if they want to access financing.

“If we want to work with the end consumer to solve their problems, we need to really meet them where they are and spend time understanding their needs,” Davis concluded.