How instant rental verification transforms tenant screening

Fintech solutions streamline the rental verification process by verifying identity and income in seconds, helping increase rental access and reducing fraud.

January 31, 2024

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Michael Goodwin

Michael is on Plaid's Credit team, where he focuses on new markets for Plaid's suite of credit products. He's worked in fintech since finishing his MBA in 2017 and is excited about enabling more equitable access to financial services.

Traditionally, the leasing process has been manual and time-consuming. It often requires prospective tenants and property managers to meet in person, make copies of documents, and then wait 5-7 days for the verification process to be completed. More recently, tenant screening platforms have sped up the process, but the data collection process is often opaque and may use erroneous or outdated data that renters have no way to refute.  

Innovations in the fintech industry are accelerating the leasing verification process by giving proptech companies and property managers direct access to information about applicants' income, identity, and overall risk. This offers benefits to both businesses and consumers. Below, we'll explore four benefits of leveraging fintech for instant rental verifications.

Speed up application and tenant income verification

When performed manually, the tenant application process can take days or even weeks. Prospective tenants have to gather paper documents which leasing agents must then verify—all while units sit empty. If some documents aren't accepted, the applicant may have to return home and bring new documents on a different day. 

The average rental is vacant for 32 days between rentals, due in part to how long it can take to process applications. Thanks to fintech solutions, the application and income verification process is now simple and fast. In most cases, income can be verified nearly instantly with tools that connect bank accounts for income and identity verification. This helps renters get into homes faster and reduces the amount of time properties sit empty. 

Reduce fraud with automated tenant screening

In addition to being time-consuming, the rental application process is also rife with fraud, as bad actors may alter documentation that impacts the rental decision. 1 in 8 rental applications today are fraudulently altered.

Instant identity verification helps reduce the risk of fraud by providing rental companies with fast and reliable identity verification. Instant identity verification works by comparing uploaded documents (such as a driver's license) with trusted databases and government records. Additionally, using selfie identity verification can reduce the risk of synthetic identity theft and improve Anti-Money Laundering (AML) compliance. 

Verifying income through fintech solutions also helps reduce the risk of fraud by providing more reliable and accurate income information. When property managers can view bank and cashflow data, they can ensure applicants' reported income matches what they earn and put in the bank. This dramatically reduces the risk that an applicant will use a forged document to get approved for a rental property.

By leveraging both instant ID and income verification, property managers and property technology (proptech) companies can reduce the risk of fraud by ensuring the information they collect is accurate.

Expanding rental access

Credit scores have traditionally been the gold standard when screening tenants' financial situations. However, they offer a limited view of prospective tenants’ financial health. Oftentimes, applicants with thin or no credit scores may not qualify, despite having solid income and a high ability to pay. Evaluating cash flow data provides a more holistic view of an applicant's actual ability to consistently pay rent. 

Take the example of a young person who recently graduated from college to start a new job. They want to move into their own place now that they have a steady income, but only recently opened their first credit card. As a result, they will likely have very low credit which would make them difficult to approve without a co-signer. 

Using cash flow data, the property management company would be able to see that they have solid W2 income, have always paid their utility bills on time, and even earn $600 a month delivering groceries via a gig app. With a more complete picture of the renter's financial situation, the property manager can approve their rental application.

Cash flow data doesn't replace credit scores; rather it offers an additional way to evaluate risk and allows property management companies to make smarter decisions. Plaid's consumer reporting agency increases both the availability and usability of cash flow data by turning complex data into actionable insights. Instead of relying on limited data, like credit scores, property managers and proptech companies can access more comprehensive insights about an applicant's financial health. 

Expanding rental access isn't just good for people looking for a home—it's also good for property owners and managers. Expanding rental access may help more renters qualify for homes, lowering the rental vacancy time. 

Cash flow data is going mainstream

Hear what 400 lending professionals and 2,000 borrowers have to say about the next era of lending

Improved criminal background eviction history checks

The typical eviction costs $7,685 when unpaid rent, legal fees, and other charges are considered. That translates into an avoidable annual expense of $2.8 million for a property management company with a 3,000-unit portfolio. 

Reducing those costs starts with combining credit checks with cash flow data, as we covered previously. However, background and eviction history checks are still a reliable method to screen potential renters and reduce costs related to evictions and damages.

Previously, background checks could take up to five days, but fintech solutions are making that process much easier while still carefully reviewing criminal history, previous evictions, and credit scores. Combining this data with cash flow data provides a fuller picture of the applicant, reduces fraud, and limits future liabilities. 

How Plaid helps accelerate leasing and reduce fraud risks 

Plaid offers a comprehensive solution for rental screening. Proptech companies and property managers can eliminate many manual processes by combining comprehensive income checks, instant identity verification, and automated payment account verification in a single solution. In many cases, they can verify and accept new rental applications in seconds. Plaid solutions that help accelerate leasing include: 

  • Identity Verification: Verify identity in 10 seconds or less by validating documents and checking for liveness. IDV offers a user-experience-optimized flow that can increase verifications by as much as 30% while helping improve conversion rates.  

  • Income: Verify income and employment in real-time by accessing payroll, bank data, and uploaded income documents—no more copying W-2s or worrying about whether documents have been altered. 

  • Auth: Authenticate bank accounts and set up ACH payments for application fees, security deposits, and rental payments.  

  • Balance: Get real-time insights into bank account balances to reduce overdraft fees and payment returns.

With the help of Plaid, Padsplit, a co-living marketplace that provides low-income workers access to cost-effective housing, reduced its reliance on manual verification by 70% and processed most applications in less than 60 seconds. 

The future of leasing is faster, smarter, and safer 

The traditional leasing process was inefficient, time-consuming, and rife with fraud. It also overlooked applicants without high W2 incomes and established credit scores. Fintech is revolutionizing the rental verification process by speeding it up and giving companies access to more data so they can make smarter decisions. 

The future of leasing is instant—and that isn't just good for businesses. Housing-insecure people with limited credit scores now have access to a more level playing field thanks to fintech innovations. 

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