Our journey towards more financial inclusion with mistho
by Lightbird’s Thomas Meier and Thuy-Linh Uong
At Lightbird we have long been convinced that payroll will be the next big thing, the next frontier, for open finance and fintech in general. And when we first met Max, we knew that we finally found someone who, like us, was obsessed with this topic.
The information contained in payroll data, e.g., one’s earnings, employment status, identity, retirement and savings contributions, tax withholding, etc. is critical to access essential financial services such as credit, mortgage applications and insurances as it provides a more holistic view of a consumer’s financial situation. Yet, payroll systems are one of the last business systems without a modern API infrastructure: for lenders, verifying payroll information still relies on phone calls and other manual processes vulnerable to fraudulent actions (costly and inefficient) — for instance, more than 1 in 10 adults in the UK still think it is “reasonable” to exaggerate income on a mortgage application; for users and loan applicants, accessing their payroll data requires to individually log into their payroll accounts, download and share relevant information electronically or to even sometimes physically bring the documents to the next local credit branch (inconvenient and unsafe). Ultimately, these archaic processes defer and deter objective lending, renting and insurance decisions and represent great barriers to universal financial access.
Mistho, as one of the first European players enabling access to employee payroll information via a standard API, contributes to, not one, but two revolutionary movements:
- First, it implements and drives the idea of open payroll in Europe, which allows consumers to regain full control over their HR and financial data and to share it directly with third parties. Just as open banking solutions improved consumer access to their personal account data, mistho wants to do the same with HR and payroll.
- Second, it simplifies access to financial services and redefines individual credit-worthiness by ensuring access to real-time, reliable and consumer-permissioned data independently of the payroll systems in which they are hosted.
🌊Open payroll or an ocean of opportunities: We talked about achieving more financial fairness for consumers, but by digitizing and facilitating the access to payroll data, mistho also provides immediate value to lenders, landlords, insurers and banks — think of processes such as identify, income and employment verifications, or also more generally of more precise KYC and risk profile definitions. Beyond this initial use case, we also believe that mistho’s solution and built integrations to payroll providers could be applicable in a variety of other exciting areas — think for instance of direct deposit account switching for neobanks.
💎First mover in Europe: Mistho is one of the pioneers providing a simple, easy-to-implement solution for income and employment verification in Europe. While players like Atomic (2019, $69M), Argyle (2018, $78M) and even Plaid (2013, $734M) are betting on open payroll in the US, we believe that the payroll market remains a massive opportunity still largely underserved by European startups.
🏆A “go and get-it” mindset: Shervin and Max are not at their first venture. And as they met to work on mistho, their respective roles just came naturally: Max = the Why (we told you, he is obsessed with the problem), Shervin = the How (you should once quiz him about History, the guy is a walking encyclopaedia!). Not only are they complimentary in their roles as founders, Max and Shervin also share a love for home-made oven-backed pizzas and more importantly an unbeatable work ethic, execution power and commitment. Proof is, in the past 9 months only, the mistho team was able to build a product able to cover more than 70% of UK employees.
We are incredibly proud to be backing mistho leading the way to new standards in dealing with payroll data in Europe and universal financial access, and look forward to continue working closely with the team as they expand in the UK and other European markets.