It’s 2019 and Income Verification is Still Terrible
One of the reasons I co-founded Quin, was that I didn’t feel there was an income verification solution that was fast, cheap, and certain. Conventional wisdom says you have to pick two of these three adjectives when engineering something, but I have never believed that when it comes to software.
When consumers borrow money or enter into certain contracts, like renting an apartment, the existing means of verifying income are missing out on at least one of these three goals, so let’s discuss.
1. Tax Returns — If you have ever gotten a mortgage, you’ve been asked to fill out the IRS’s 4506-T form, which allows the creditor to pull your filed tax return. This is pretty good except that it usually costs $25 and takes from a couple days to a week to get back from one of the various service providers. I would say this is neither fast nor cheap, and only somewhat certain as the data is at least partially16 months old, since you don’t file your taxes until April usually. Thus, current income is not necessarily reflected. It’s the rear-view mirror of income verification approaches.
2. Bank Accounts — The approach du jour is to use the bank account aggregation technologies that allow a lender to look at someone’s bank account for consistent deposits. These deposits are assumed to be direct deposits from a job, and the creditor then goes through a lot of calculations to arrive at a gross amount of pay. This is certainly fast, but the programming efforts make it anything but cheap and it opens up the lender to a lot of fraud. Have you ever increased the number of exemptions on your paychecks? It is very easy to simulate a large raise by cranking up your exemptions to 30, for example. These exemption increases appear every pay period unless removed, so it will look very convincing, and ACH knows zilch about the transaction details. Another fraud technique is running through large expense reimbursements which get included in the direct deposits, where the shady borrower calls the variations “variable comp”. Overall, this method of determining income is a very blunt approach to what can be a very detailed question(e.g. is the mortgage borrower under 43% DTI). Wait for the next housing crisis and its own version of the movie “The Big Short”. I am sure this approach to income verification will make the press, just like NINJA loans did last time, as it’s too easy to fake.
3. Call HR — Everyone’s least favorite approach. Require expensive underwriting staff, working through a phone maze, to try to connect with someone, and of course the employer liability associated with what the HR rep might say. It’s no one’s favorite, and it’s expensive from a labor perspective on both sides.
4. The Work Number — Prices per verification seem to vary from $15 to $40 depending on the deal you get or volume, it requires the employee to give the lender a code, and has limited coverage(big companies yes, large population no). This is the most accurate solution of those mentioned so far, but the cost is very high, and the process of proving permissible purpose has manifested itself in this code generation by the employee which makes the process a bit archaic. My experience is that it is used on a very small fraction of all loan applicants due to high costs, friction and coverage.
5. The Pay Stub or Earnings Statement — Paystubs are great, and most all lenders look at them, but how does a lender know it is real? Just google, “create a fake paystub” and for a few dollars you can create something that will fool most people.
Because none of these approaches are perfect, lenders will use a combination of the above, further adding costs and overhead to an already complicated and inefficient process. It was because of this that we created our company Quin and the Verified By Quin application.
Imagine if a consumer downloaded their latest earnings statement from their company payroll portal, and got a version encoded by Quin. This Quin enabled paystub is branded, and can be verified for authenticity by any mobile device with the Verified By Quin mobile app. When the employee provides the paystub statement to a prospective lender or landlord, the lender will see the Quin logo, and know they can verify it instantly, OR it can be verified via API from a loan origination system. If the landlord or lender doesn’t have the Quin app, shooting a photo of it with their mobile camera will push them to the app store to get it, where their first verification is on the house(i.e. free).
What we have done is taken a process that can take up to a week, and squished it down to literally seconds. Not only have we cut out a lot of time, but included the most up-to-date income data at a much, much lower price. Fast, cheap and certain is here for income verification, with Quin. In summary:
· For the employer or payroll provider — No more phone calls, a new revenue stream, happy employees, reduced costs
· For the lender — Fast, cheap, and certain income verification
· For the employee — Better access to financial services via instant, 100% verifiable income
We want to drive billions of dollars of costs out of employers while providing them a new revenue stream, allow consumers faster access to credit, and greatly reduce fraud for financial services industry.
For more info, visit our website at www.verifiedbyquin.com, patent pending.
Tony Morosini
Co-Founder and CEO, Quin, Inc.