Plaid Enters Income Verification Market - A New Player

Plaid Launches New Income Verification Product

Following the collapse of its merger agreement with Visa, Plaid has unveiled a new product focused on income verification. This offering, designed to “improve the lending lifecycle,” leverages payroll data for enhanced accuracy.

The new product, simply named Income, is currently in its beta phase. It aims to simplify the process of income verification for various financial applications, including loan approvals, mortgage qualifications, apartment rentals, and vehicle leasing.

Plaid Income provides lenders – encompassing both fintech firms and traditional financial institutions – with verified, permissioned data regarding a user’s income, employment status, and tax obligations.

Development of the Payroll Product Suite

The San Francisco-based company has been actively developing its Payroll product suite for over a year. Last month saw the launch of Deposit Switch, another component of this suite.

Deposit Switch facilitates a “quick” transition of direct deposits to either new or existing bank accounts, achieved through a connection to the user’s payroll account via Plaid’s platform.

Plaid strategically chose to develop its income verification capabilities internally, rather than pursuing a partnership with another fintech company.

A company spokesperson communicated to TechCrunch that Plaid consistently strives to offer individuals a comprehensive perspective on their financial standing.

“We’ve expanded support to encompass various consumer-permissioned data types over the past few years, including liabilities, investments, and mortgage data,” the spokesperson explained. “It’s become evident that payroll data holds significant potential for enabling innovative and more efficient services that empower individuals to manage their finances effectively, and we were determined to bring this to market ourselves.”

Streamlining the Verification Process

Traditionally, verifying employment status, income, and repayment ability has presented a considerable challenge for applicants.

Applicants often face the need to gather and submit multiple documents, such as PDFs, which lenders must then process and review. Plaid’s Income product seeks to streamline this process, according to the fintech infrastructure provider.

Through Plaid Link, applicants can share their payroll information via two distinct methods:

• Authenticating through their employer or payroll provider account.
• Uploading payroll documents, including pay stubs, W2 forms, and supported 1099 types.

To enhance user experience, Plaid is developing credential-less authentication features. This would allow lenders to locate an applicant’s income information using key identifying details, without requiring traditional login credentials.

Applicants will also retain the ability to review the data they are sharing and withdraw their consent at any time.

Payroll Data: A Key Opportunity

Kate Adamson, Plaid’s product lead, emphasized the company’s view of payroll data access as a significant opportunity within the financial services sector.

“The last decade of fintech innovation has demonstrated that individuals can make more informed financial decisions with improved access to and control over their financial data,” she stated to TechCrunch.

A Competitive Landscape

The income verification space is becoming increasingly competitive. Last June, TechCrunch highlighted Pinwheel, an API layer for payroll data.

Pinwheel manages income and employee verification, as well as facilitating direct deposit switching and management. The company emerged from stealth mode last year, securing $7 million in seed funding from First Round Capital and Upfront Ventures.

Argyle is another player, focused on building a “gateway to access employment records.” In October, Argyle announced a $20 million Series A funding round led by Bain Capital Ventures.

Interestingly, Argyle’s name was intentionally inspired by Plaid, as revealed by Argyle CEO and co-founder Shmulik Fishman. He expressed admiration for Plaid and explained that Argyle was chosen from a list of patterns, as a deliberate homage.

“We want to be the Plaid for employment records,” Fishman stated.

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