July 01, 2024




Dealing With An Incomplete Credit Risk Picture

Traditionally, the first step to verifying income data was the verification of documentation like KYC, income tax returns, the net worth of your assets and credit history. While asking for the given data from the borrower is the norm, there are certain limitations to this process. Typically, gathering and verifying these documents manually is extremely inconvenient and inefficient, especially when dealing with a large number of applicants. It involves a large amount of paperwork, and processing them manually can lead to errors as well as delays. 

The manual verification process lacks standardization due to the various types of documentation to be collected and verified. Further, physical documentation can provide only limited information about the borrower. Thus, the limited and lack of updated information fails to provide lenders with a more holistic insight into the financial standing of the borrower.

Data Beyond Traditional Credit Score & Income Tax Return Can Improve Underwriting

In today’s digital world, lenders are seeking more insight into the borrower’s ability to pay. They are opting for payroll automation as it provides a holistic view of the applicant and provides updates in real-time. 

Compared to the manual approaches to income and employment verification, automated payroll verification solutions help streamline processes and reduce inefficiencies in the loan approval process. 

Since underwriting involves gauging the ability of the borrower to repay, it is important to ensure that the complete financial picture of the person seeking the loan can be obtained. For underwriting to be effective, it is integral to look beyond simple credit scores and income tax returns and obtain an in-depth understanding of the borrower’s financials. 

Unlike manual processes, automated payroll verification provides a holistic view of the borrower by including various factors such as payslip verification, income and employment data, real-time updates of financial changes, etc. This ensures that the underwriting process is more credible and reduces the credit risk of the lenders.

Real-Time Income & Employment Data Is The Key To Effective Loan Decisions

The COVID-19 pandemic has drastically changed the work dynamic of the credit industry. Further, increased competition among the stakeholders has forced lenders to remain on the top despite the constantly changing circumstances. 

However, traditional credit scores only offer a rear-view perspective which falls short of providing real-time insights into the borrower’s finances. In contrast, automated payroll processes provide several benefits that help expedite the process of loan approval, such as –

  1. Updated Payroll Data 

Automated payroll verification provides real-time insights into the financials of the borrower and helps ensure that the lender stays updated on the financial status of the borrower. So, if there is any activity that affects the financials of the borrower, such as

being fired, shifting a job, new investments, etc., the lender would be updated about the information. 

  1. Reduced Risk of Fraud

In the financial year 2022, the Reserve Bank of India (RBI) reported over 9,103 cases of bank fraud amounting to Rs. 605 Billion. This marks a rising threat to lenders, especially because they are typically forced to rely on the borrower’s self-reported data as the basis for extending credit, which can often be manipulated.  

Automated payroll data verification reduces the scope of inaccuracies of self-reported income by directly accessing the borrower’s data from employers or financial institutions. This helps ensure that the risk of loan fraud can be reduced. 

  1. Streamlines the Loan Approval Process

Manual verification involves a lot of physical paperwork, which makes the entire verification process complicated and time-consuming. However, automated payroll verification automatically collects, arranges, and streamlines the entire verification process. This helps ensure a major boost to efficiency as the documents can be verified and processed quicker. Thus, expediting the overall loan approval process.

Ways To Get A More Holistic View Of The Consumer’s Current Ability To Repay Loans

The best way to get a more holistic view of the consumer’s current ability to repay loans is to combine traditional credit scores with modern data-driven methods. While traditional methods give a brief overview, modern payroll data gives useful in-depth insights into the financial status of the borrower. 

Embracing newer technologies and integrating them into the traditional system helps smoothen out the transition of lenders used to archaic methods of payroll verification. Automated payroll verification helps enable digital solutions that make the entire process error-proof and hassle-free.

Another advantage of automating the payroll verification process is to streamline the entire process. This ensures that the lender has easy access to the standardized payroll data of the borrowers. Further, payroll automation ensures that the changes in the financial status of the borrower are updated to the lender in real-time. So, be it losing a job or finding a new one, lenders will be constantly updated about the borrower and can make their decisions accordingly.


Any lender or financial institution will want to extend credit to a credible borrower who is likely to return their money. However, with the change in technology, credit scores fail to provide a complete idea about the financial credibility of the person. 

Automated methods of income and employment verification ensure that the lender has access to the entire financial data of the borrower. Thus, it drastically reduces the risk of bad loans being extended by lenders. 

Considering the rising instances of loan fraud, dealing with an incomplete credit risk picture can be very dangerous for lenders. Hence, payroll-attached API solutions have become increasingly necessary for lenders to ensure that credit can be extended to borrowers effectively and efficiently. 

With the first-of-its-kind product offering in India and a feature-packed platform, Tartan’s demo session is worth giving a try. Our passionate commitment and a rock-solid performance will make you stick with us forever

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©2024 TartanHQ Inc.

Empowering businesses with API-enabled solutions to build next-generation products.

Subscribe to get an update :

©2024 TartanHQ Inc.

Empowering businesses with API-enabled solutions to build next-generation products.

Subscribe to get an update :

©2024 TartanHQ Inc.