Last week, Plaid launched its income verification beta product Plaid Income as an extension of its recent venture into payroll data. Earlier this year, the firm rolled out Deposit Switch which allows users to switch their direct deposits to a bank account of their choice by linking their payroll account.
Plaid Income offers consumers the opportunity to verify their income and provide lenders with structured income, employment, tax data and source documents.
“With Income, lenders can process this data faster and give applicants immediate certainty,” said Plaid product lead, Kate Adamson. “As a result, lenders can make more informed risk decisions with high-integrity information, issue pre-approvals or approvals faster, quickly approve a more inclusive set of applicants, and spend fewer resources manually reviewing documents.”
Income verification is a crucial process to secure loans, qualify for mortgages, rent apartments, lease vehicles and get personalized financial advice. The product intends to address friction that arises through income verification processes such as sharing and retrieving multiple documents and PDFs during an income review.
“As risk appetite across financial services has decreased, we’ve seen lenders add additional verification steps to their application process to gain more underwriting confidence,” said Adamson. “Since lenders don’t want to compromise applicant experience with burdensome additional steps, Plaid Income helps provide instant connectivity to income, employment and tax data right from the source — payroll providers.”
The offering supports two routes of income verification, namely Payroll Income, which allows users to authenticate through their employer or payroll provider account, and Document Income, which enables users to upload payroll documents through Plaid Link, including paystubs, W2s, and supported types of 1099s.
According to Plaid, Income supports real-time payroll authentication for over 250,000 of the largest employers in the United States, including 80 percent of the Fortune 100.
The solution covers applicants that range from full-time and part-time employees, freelancers, and gig economy workers. With the simultaneous rise in unemployment rates and a flourishing gig economy, up to date user-permissioned data is especially significant for independent contractors during the underwriting process.
“Decisions based on income verification and employment data – from small business, emergency or auto loans to housing rentals and mortgages – are life-altering, for better or worse,” said Shmulik Fishman, CEO and co-founder of employment data platform Argyle.
“This information is the bedrock of financial transactions in society. Yet the absence of user-permissioned data has fueled a circle of mistrust between consumers, employers and financial institutions, disproportionately impacting hourly workers, independent contractors and those who live paycheck to paycheck.”
According to Fishman, it is imperative that when workers seek financial support in the form of cash advances or other products, their entire financial history is up to date and available to providers.This minimizes predatory lending risks and allows applicants to get financial relief faster.
Plaid is currently developing credential-less authentication features to improve upon its consumer onboarding experience in partnership with payroll providers, such as ADP.
“ADP and Plaid are actively working towards a partnership around consumer-permissioned payroll data that will enable consumers’ credential-less access to their payroll details using ADP’s API,” said Meraj Mohammad, vice president at ADP Ventures.