April 19, 2022

Build a more inclusive credit system with Plaid Income

Shibani Sanan

Consumers have the right to easily access and share their bank data and when it comes to obtaining credit, information surrounding income and employment verification should be no different.

The ability to easily and securely share income and employment data enables consumers to make the most of financial products and services, so they can do things like: buy a car, get approved for a mortgage, qualify for a credit card, or rent an apartment. 

Unfortunately, income verification continues to be a highly manual and time-consuming process that is error-prone and, more consequently, not representative of today’s workforce. Many workers, including gig workers, earned-wage workers, and immigrants, inevitably fall outside the traditional credit system. According to Time Magazine, “Low-income consumers make up [a] demographic disproportionately disadvantaged by the credit system. About 45% of adults in low-income neighborhoods are credit invisible or have unscored credit records, the CFPB data shows.”

On top of that, the proliferation of easy and fast digital financial experiences, such as instant payments between friends, have significantly leveled up consumer expectations. In order for lenders to create a more inclusive credit system as well as provide consumers with faster, easier, and more secure lending experiences, lenders need better tools and processes. 

That’s why we’re excited to officially announce the launch of Plaid Income. Plaid aims to simplify the income and employment verification process for lenders, and in turn, consumers. Over the last year, we’ve worked with 40+ Beta partners to evolve our Income solution so that we can meet the diverse needs of lenders and consumers. Alongside the launch of Plaid Income, we’re excited to debut a suite of features that support new and additional use cases.

Plaid Income helps lenders:

Improve the decisioning and underwriting process

The underwriting process may be unique for each lender, and people get their income through different means – whether that’s through a traditional paycheck, they are part of the gig economy or are self-employed. With Plaid Income, consumers can now safely and securely verify their income through three different methods:

  • Payroll Income – a consumer connects to their payroll or employer provider and Plaid retrieves their income straight from the source and provides it to the lender. 

  • Document Income – a consumer uploads their pay-stubs or W2 and Plaid parses the data and returns the data to the lender, in a simple and easy-to-digest format. 

  • Bank Income – a consumer connects to their bank and Plaid identifies and categorizes income data a consumer can then select and return to the lender. 

In the past year, we’ve improved our coverage to support different types of workers, including full-time and part-time employees, gig economy workers, and more. Plaid Income now has ~80% of coverage of the US workforce via payroll providers. On the bank side, Plaid has connections with over 12K+ financial institutions. And last but not least, Plaid Income has document coverage for pay stubs and W2s. 

Access the right data at the right time

Every lending institution is different and thinks about income verification in a slightly different way. Some require income verification at different stages of the underwriting journey and some require different types of income data depending on the type of users they are serving and/or loan size they are providing. 

We’ve created Plaid Income to be a fully-configurable, flexible solution that can adapt to lenders’ data and underwriting needs. We offer the ability to configure the solution, using a combination of our Income products as a cascade of solutions, at different points of the user flow, ensuring they are getting the right data at the right point in time. 

Provide best-in-class consumer conversion

Plaid consistently focuses on providing best-in-class consumer conversion across our products, creating simple and seamless experiences that benefit both consumers and lenders. Plaid Income also leverages Plaid Link technology. 

Plaid Income is designed to leverage a consumer’s past connections to Plaid and a specific lender to provide an even more streamlined experience, removing duplicate processes like employer and payroll search, or entering bank credentials. 

Depending on the use case, Plaid can utilize information from a prior connection in order to streamline the verification process, allowing the consumer to skip steps in the Link flow, if applicable. Plaid works with lenders to define what user flow optimizations make sense to implement depending on specific use cases and data needs. 

“The fast connection with Plaid keeps more people in our application flow and allows some borrowers to receive funds within minutes of verifying their income.”

- Nathan Wiggins, Director of Technology Innovation at Purpose Financial

Improve data accuracy and security

Providing accurate income data was a consistent lender concern we heard loud and clear. With Plaid Income, payroll and bank data are extracted straight from the source of truth, providing high accuracy and fidelity.

Our Bank Income data quality relies on high-accuracy machine learning models that help categorize income for easy identification and selection from consumers and therefore more accurate information sent to customers. Using our income categorization model, our customer Moneyspot was able to improve their income categorization accuracy by 38% vs. their previous solution1.

For Document Income, we've developed a robust digitization offering that includes the ability to classify, extract, analyze data, and detect fraud. We've partnered with Ocrolus to power this offering to return lender document data in a safe and easy-to-digest way. In addition, we’ve developed risk signaling technology to help lenders gauge fidelity from documents and detect document tampering. Given Plaid’s comprehensive solution, with the ability to extract income from multiple sources, we can cross-reference risk signals across paystubs and linked bank accounts. For example, we can match document-uploaded paystubs with entries from bank statements to verify accuracy. This is one of the many risk signals we are developing in the upcoming months to create a more robust risk signaling technology for lenders. 

The ability to verify employment status, income, and capacity to pay is crucial to nearly every loan application. Historically, proving these things has been difficult for many applicants. They often need to retrieve and share multiple documents, which a lender must process and review. For the applicant, this can lead to frustration, stress, and uncertainty. 

A faster, smoother lending process

Plaid Income makes it easier for consumers to verify income so they may (among other things):

  • secure loans

  • qualify for mortgages

  • rent apartments

  • lease vehicles

  • obtain personalized financial advice

In turn, Plaid enables lenders to provide consumers with a faster, easier, and more transparent lending experience, ultimately increasing conversions. 

Whether you’re a developer, rental screener, involved in property technology, or simply a lender looking to improve your underwriting processes, we are here to help. 

1 Information as provided by MoneySpot USA, LLC in March 2022.