Traditionally, manual methods of income and employment verification have been very cumbersome and time-consuming. It involved contacting each applicant or their employers to verify their payslips or banking credentials and following up over regular intervals to ensure that the Payroll data collected remains up to date and relevant. Apart from this being a lengthy process, it also had a high margin of error, which often rendered the data unreliable.
However, with the increasing competition and rising labor costs, lenders and financial institutions have started seeking more efficient methods of payroll verification. The rising demand for technology-driven convenience has led FinTech start-ups to develop automated verification processes powered by APIs. Since present-day consumers cannot afford the delays, lenders have started leveraging digital income and employment verifications to ensure that the entire process of payroll verification can be made smooth and error-free.
Identifying areas of concern is crucial in finding an apt solution for any problem. For example, what data sources or data ranges can best align with their business needs? These questions help lenders identify the specific factors they need to consider while opting to shift to automated payroll verification.
Here are the 3 things to consider while using Income data:-
Credit scores aren’t the only factor that banks and financial institutions rely on. Lenders often use a variety of other types of information in their loan evaluation process, such as the data provided by the borrower on the credit application, which includes their income, how long they have lived in their residence and other banking relationships that they may have, etc.
While most lenders still use a credit score to determine creditworthiness in today’s age, its failure to provide a holistic view of the credit risk involved has led to lenders opting for more reliable sources. Income and employment data powered by payroll APIs provide a comprehensive view of the borrower’s financial standing and ensure that the lender has real-time access to all the necessary payroll data.
For example, everyone knows the importance of credit scores and the various techniques that may be used to legitimately boost it. This enables consumers to present a false narrative of their financial ability to repay. However, automated payroll verification APIs provide all the financial information such as a verified income, stable employment, and the past financial history of the consumer. This makes it almost impossible for the consumers to present a false financial picture and considerably lowers the credit risk of the lender.
For payroll verification to be successful, quality data is critical. However, not all data is extracted in the same manner or from the same sources, and this leads to inaccuracy in the scope of income and payroll verification. So, up-to-date primary data from employers and verified payroll databases enable financial institutions to gauge a better understanding of the consumer’s financial standing.
Since payroll data is a dynamic concept that is subject to frequent changes, regularly updating this data is integral to ensure that the data remains relevant. However, relying on payroll databases may lead to the collection of stale or outdated data and eventually give rise to inaccuracies in the results obtained. Thus, the data source must be frequently verified and updated.
Further, factors such as fake documentation, fraudulent payslips, and overestimation or underestimation of payroll data have created serious inaccuracies in the system of manual payroll data verification. However, collecting such verified payroll data and regularly updating it is not viable in the case of manual verification.
Thus, these are a few reasons why error-free and API-based payroll data is now the need of the hour for any lender looking to remain competitive in the present day.
Manual verification often involves collecting data from each applicant and regularly following up to prevent the data from becoming outdated. The entire process is very time-consuming and involves increased labor costs.
In contrast, automated payroll verification helps ensure that the speed and efficiency of the entire process is maintained. This helps lenders avoid the delays caused by manual verification and allow them access to updated payroll data in real-time.
Another issue is the high margin of error that manual verification brings due to the extremely cumbersome and complicated process of obtaining and verifying payroll data. It also makes it necessary for banks and financial institutions to cross-verify the data collected for increased accuracy, which in turn makes the entire process time-consuming.
However, the data collected by API-powered payroll solutions are sourced directly from the employers and are digitally verified. This ensures that the data collected is reliable and doesn’t need to be cross-checked again. It eventually helps save precious time and effort for lenders and banks.
Thus, these are some of the factors worth considering when dealing with employer-provided data. Automated verification ensures reduced friction to maintain a smooth and hassle-free verification process.
Considering the dynamic lending environment, lenders must ensure that they effectively utilize each possible option to its full potential. One of the best ways to boost the efficiency of your lending process is by choosing an effective verification platform that understands your organization's needs and caters to your specific needs.
Tartan is a Payroll connectivity and full-stack verification API company that enables consent-driven employment and income verification in real time. We help to simplify banking by eliminating reliance on manual processes for income and employment verifications and KYC-related verifications and assess creditworthiness in real-time quickly to make accurate risk assessments with over 30+ precise and verified data points.
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 rock-solid performance will make you stick with us forever.
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