On a daily basis, payroll providers solve many of the pain points faced by HR teams. For example, payroll solutions save employers time and resources and deliver valuable services that enhance the employee experience.
However, by leveraging their valuable data in new ways, payroll providers have the ability to deliver income and employment verification solutions that even better meet the needs of HR teams. Payroll providers can benefit from their data by connecting with an open banking platform—a consumer-permissioned means of accessing financial data via APIs. By leveraging data to enable empowering and innovative services open banking benefits both the service provider and the consumer.
Ultimately, payroll providers also hone their competitive edge and bolster their security when they connect to open banking platforms. Once connected to the platforms via API, payroll providers empower employers and consumers to benefit from their payroll data on request. The API connection is a partnership between a payroll provider and an open banking platform. A mutually-beneficial partnership that’s dedicated to delivering the best, most secure experience to businesses and their employees.
Providers can use the open banking connections to add new services and apps to their offerings. Additionally, the data doesn’t have to be sent in batches to be stored in a database to be used by third parties. These real-time data connections benefit consumers, payroll companies, and employees by minimizing when and how data is used and providing it more securely and transparently.
Let’s look at how these partnership-driven connections help payroll providers unlock new opportunities.
How Does Connecting to Payroll Data Work?
Payroll data can streamline the verification of income and employment for various use cases, such as:
- Mortgage lending
- Auto lending
- Personal lending
- Tenant screening
- Background checks
- Government verification
- Personal financial management
Payroll providers can connect to open banking platforms and data aggregators in a variety of ways. Many aggregators offer only credentialed access to payroll data, which means that the data access provider uses a consumer’s credentials to access a payroll platform and get the necessary data. While this method may deliver the data necessary for employment and income verifications, credentialed access is less secure for payroll providers and a less consumer-friendly experience since employees may not know their payroll provider or login credentials.
Ideally, connecting consumers to their valuable payroll data happens via direct API connections. API connections are far more secure than credentialed access and don’t require employees to know their payroll portal credentials to access the content. The user doesn’t even have to know their provider. An open banking platform, or data access provider, is a better method to connect employees to their data with a direct API connection. It provides the highest standard of control and transparency over who is accessing their data and how it is being used to benefit them.
Payroll data clearly helps consumers benefit from their financial data to access important financial services. But what’s in it for payroll providers? Why should they connect to open banking platforms?
How Payroll Providers Benefit from Connecting to Open Banking Platforms
Payroll providers can leverage open banking platforms to enable better experiences for their customers, effectively improving their competitive position and ensuring secure data sharing. A competitive advantage of payroll providers would then be the security and privacy standards baked into the API direct connection. In the end, everyone benefits, from payroll providers, to data access providers, to verifiers, to employers and employees.
How Connecting to Open Banking Platforms Makes Payroll Providers More Competitive
Connecting to an open banking platform empowers payroll providers to better serve their core target: HR executives.
What do HR executives need? They need a reliable payroll solution, one that may also deliver other ancillary services, such as benefits, expense reporting, applicant tracking. Like almost any other executive, HR executives need more time and resources for their team, which means that time-consuming, manual employment and income verifications can become a burden.
Many HR executives are already choosing to outsource their payroll and ancillary HR services in order to cut costs and save time. But to whom they outsource matters. The payroll and HR experience is an important element of a positive employee experience with a company. Payroll providers who already offer successful payroll and HR experiences have the opportunity to further enhance those experiences with an additional service: streamlined, simple, and empowering income and employment verification.
By connecting to an open banking platform, payroll providers enable employees to self-permission their employment and income data when trying to access a financial service or engage with the other use cases described above. In this way, the employee benefits from their financial data by delivering a more reliable, comprehensive view of their financial story for greater access to financial services. In turn, verifiers get more accurate, real-time data for better decisioning. Both get a streamlined, faster experience that saves everyone time and resources. And employers (HR executives specifically) never had to waste the resources performing the verifications.
A ready connection for third parties through an open banking connection also makes it easier to add or provide services through third parties like fintechs. These connections can provide financial guidance, simplify complex purchases like insurance or mortgages, or just provide a clearer view for tax preparation.
All of those benefits come from the payroll provider who, through partnership with an open banking platform, offers a better experience and empowers both employer and employee. That payroll provider distinguishes itself among its competitors and better positions itself to onboard more clients and scale.
How Connecting to Open Banking Platforms Maintains Payroll Providers’ Security
In contrast to the model described above, payroll providers and employers open themselves up to risk when they send data used for verifications in batches and are stored with a third party. These methods leave them open to breaches because they house the data. This method potentially compromises employees’ private information by duplicating data and storing it in multiple places. However, connecting to an open banking platform through an API removes the necessity of sending data in batches. Instead, verifiers only need to access the data at the moment of verification. Thanks to real-time connections to accurate, data,no parties have to pass through the protection of an employer’s or payroll provider’s firewall.
And when those APIs use secure authentication, such as OAuth, employees keep their credentials secret and secure. By partnering with an open banking platform, payroll providers protect themselves, employers, and consumers. Offering a secure experience also empowers employers and employees, and further sharpens the competitive edge already honed by connecting to an open banking platform.
Connecting to open banking platforms enables payroll providers to scale by delivering secure, streamlined, empowering experiences for HR teams and employees.
Data has driven incredible improvements in the way people have experienced financial services over the last decade. Services that once could only be done at bank branches can now be easily accessed online. And people now have powerful financial information, products, and management tools at their fingertips via their mobile devices.
The expansion of open banking is creating a new turning point in the money experience. Open banking allows consumers to share their financial data with third-party developers and fintechs in exchange for new services—unlocking the potential of financial data to catalyze another generation of innovation across the industry. Services such as providing financial data to build credit and gain immediate access to capital, initiating a direct payment to a business or individual, and managing household expenses and budgets fundamentally change the boundaries of banking relationships.
Responsible data practices are required for participants to best take advantage of this technology. The key differentiator that sets the world of open banking apart from previous innovation environments is the requirement for consumer consent in data sharing and adherence to core data principles: control, access, transparency, traceability, and security (CATTS).
In order to enable open banking and empower customers, data access agreements (DAA) must be in place to ensure access to financial data that financial service providers need to innovate and provide new services and benefits in a digital world. These agreements define common rules for how two parties—usually an open banking platform or financial data aggregator and a financial institution—will communicate and exchange financial data. More secure data access agreements mean more connections that financial service providers can use to empower consumers with greater control over their financial health.
Finicity’s Market Leadership in Financial Data
Finicity’s connections cover 95% of direct deposit accounts in North America. And thanks to 20 signed direct access agreements with some of the nation’s largest financial institutions, we support 60% of our traffic with direct API access. We expect that direct-API traffic share to grow to over 80% by the end of 2021, greatly reducing the use of user credentials and screen scraping in the financial services market.
Since 2017, we have led in signing data access agreements with the top FIs including Wells Fargo, Bank of America, Chase, Fidelity and many others. And, in just the past year, Finicity has worked to strengthen the open banking ecosystem by creating stronger, more secure data access agreements and partnerships with key financial institutions and fintechs, including Charles Schwab, TD Bank, Citi, Brex, Chime, US Bank, and BMO Harris.
And where Finicity has been leading, the market is following. Along with an increasing number of financial institutions and other financial service providers, more payroll providers are recognizing that consumers can benefit from the data they hold. As a result, these providers are adopting API connections to open banking platforms that expand the use of financial data in lending, tenant screening, background checks, government verification and personal financial management. Finicity announced a Direct Access Agreement with the leading payroll provider in September 2020, representing 16% of the payroll provider market.
DAAs provide the broader fintech and financial services community with access, through Finicity, to consumer-permissioned financial data that enables a variety of apps and services across financial management, payments, lending, and beyond. And a key result for all parties is enhanced data stability, accuracy and improved security through reduction of user credentials.
A direct access agreement with Finicity ensures the most reliable data security for financial institutions while still enabling fintechs and financial service providers to deliver solutions that empower consumers and foster financial inclusion. To learn more about becoming a supported financial institution and how that benefits you and your customers, be sure to check out our financial institutions page.
Payroll data is a tremendous resource upon which fintechs and financial services providers can build better experiences for consumers and, at the same time, enable consumers to benefit more from their financial data.
But enabling access to payroll data isn’t as easy as flipping a switch. And we can’t build better experiences without a simple and trusted process for consumers. This is where open banking comes in. Open banking platforms can unlock payroll data, but such data access has to be done the right way with a consumer-centric model that ensures successful connections and collection of data.
How to Leverage Payroll Data the Right Way
Payroll data is a beneficial resource, but how it’s accessed is central to enhancing the customer experience and ensuring successful data collection. Let’s look at this in greater detail.
API Connections Vs Credentialed Access
In some cases, data providers look to access payroll data by using a consumer’s credentials. Unfortunately, this model is overly cumbersome for the consumer. Unlike digital banking, where consumers know the data source and have login credentials, consumers are largely unaware of their payroll provider, and in many cases haven’t even set up an account to access a payroll portal. Plus, many employers use a firewall-protected HR portal to enable employees to view paystubs and other income information, which means the employee never directly interacts with the payroll provider. That firewall also protects the payroll data from external access.
These credentialed-access hurdles make it painful for employees to permission data access and significantly depress successful connections to payroll data. With a low hit rate, financial services innovators or others looking to leverage such data are left with an awkward, sub-par user experience at best and no data at worst.
The best way to leverage payroll data is to provide technology that enables the consumer to easily access their data, and protects them while they do so. This is achieved through direct API connections to payroll providers that eliminate the need for employees to have or know their credentials. It even eliminates the need to know who their employer is using as a payroll provider.
By connecting directly via an API, an open banking platform provider partners with payroll organizations that are equally committed to providing consumers with access to their financial data. The open banking platform can then connect the employee with their payroll provider for them, enabling the employee to more readily benefit from their payroll data and, should they choose, permission access of that data to a fintech or financial service provider.
Finicity is already leveraging direct API connections to payroll providers and is quickly expanding those tested and proven connections to reach more employers and benefit more employees. We already provide direct connectivity that covers tens of millions of employees in the U.S. Finicity has a history of building partnerships with leading data sources, such as our direct API connection with the largest payroll provider.
In the case of payroll data, direct API connections have created the best experiences and led to the best outcomes for both our partners and for consumers. This remains consistent with our market push on direct API connections to a broad range of financial institutions.
Consumer-Centric Means Consumer Protection: Operating as a CRA
It’s not enough to promise consumer-centric processes or protection in word only. After all, leveraging payroll data the right way also comes down to how the open banking platform handles the data and how they involve the consumer in that process.
One of the primary uses of payroll data is in lending. Our Finicity Lend™ solution set, for example, currently leverages payroll data to enhance income and employment verifications necessary for credit decisioning. In this use case, consumers can gain additional protection and strengthen engagement through the Fair Credit Reporting Act (FCRA). These protections hold the data provider accountable for data accuracy and ensure the consumer has a mechanism to dispute the data in case of issues.
While other data providers claim FCRA compliance, at Finicity we’re not just talk. Finicity operates as a Consumer Reporting Agency (CRA), which means we are legally required to adhere to FCRA requirements. When data providers are delivering income, asset, and/or employment data for the purpose of credit decisioning, operating as a CRA is not only the best way to provide the data, it’s the right way.
But data access that truly empowers the consumer and keeps data secure doesn’t stop there. We also keep the consumer at the center of all our data-access experiences with our CATTS data principles: Control, Access, Transparency, Traceability, and Security. These principles inform our policies, our products, and ultimately our entire approach to empowering the consumer with their financial data.
It all comes back to trust. Consumer-centric principles, reinforced both in word and in deed, establish trust between data access providers and consumers, as well as with financial institutions, payroll providers, and other financial services providers.
How Can Open Banking Platforms Use Payroll Data?
Payroll data enables financial service innovators to leverage consumer data to improve decisioning and enhance lending processes, as well as create new financial services experiences.
While financial service providers have traditionally relied on ‘physical’ documents, such as bank statements, tax documents, paystubs, and more to verify information about consumers, digital payroll data via open banking provides quick access to all insights necessary to create next-gen financial experiences.
Finicity payroll partnerships provide access that enable or enhance various use cases, such as:
- Mortgage lending
- Auto lending
- Personal lending
- Tenant screening
- Background checks
- Government verification
- Personal financial management
And where Finicity has been leading the market, the market is following. Along with an increasing number of financial institutions and other financial service providers, more payroll providers are recognizing that consumers can benefit from the data they hold. As a result, these providers are adopting API connections to open banking platforms that expand the use of financial data.
Employees aren’t the only ones who benefit from consumer-permissioned data. Payroll providers ensure greater security when specific data is only shared with third parties for the use case, rather than released on a large, broad scale. They retain greater control in their role as data stewards.
Payroll data goes even further in delivering a more complete view of a consumer’s financial story when it’s paired with other open banking capabilities, such as validating information with bank transactions and, in appropriate cases, with digitized paystubs—another area where Finicity has led the market.
Consumers own their payroll data, and they should be able to benefit from it. But to ensure the best experience for the consumer and the financial services innovators looking to use such data, enabling access to that data must be done right. See in action how Finicity is leveraging partnerships with payroll providers and financial institutions to provide technology that empowers consumers to benefit from their financial data and improve their lives.
Congresswoman Anna Eshoo once said, “Innovation is the calling card of the future.” Finicity operates with a similar eye to the future, each new data solution taking us closer to the future that we imagine. Our vision includes truly empowered consumers with full control over their personal data and common data sharing standards that facilitate creative problem solving within secure frameworks. Our work with the Financial Data Exchange (FDX) is evidence of our investment in this future. We know that the work we do today will impact the world we live in tomorrow.
We are, therefore, pleased to have entered into a direct data agreement with U.S. Bank. Finicity and U.S. Bank share an unwavering commitment to consumers and to protecting their personal financial data. This agreement is the result of a collaborative partnership focused on designing superior consumer experiences and on setting the stage for the future of data sharing.
This represents our continued efforts in leading the development of next-gen data access solutions and it will translate into multiple meaningful benefits for U.S. Bank customers. These benefits include increased security, reliability, and control. For U.S. Bank customers, permissioning their data will now be easier and more secure, the ultimate in customer experience. The relationship centers on an application programming interface (API) that provides rapid access to data through a secure tokenized process. Because of this tokenization, U.S. Bank customers will not have to share their credentials with anyone other than U.S. Bank.
Integration will require minimal effort for U.S. Bank customers. The direct API experience will simply redirect them to a familiar login experience from U.S. Bank. Emphasizing the importance of consumer control, each customer will ultimately have access to a permissioning portal where they can access, manage, and restrict the sharing of their financial data. Consumer education and consent are at the core of this data sharing agreement and inform each aspect of implementation.
Finicity is leading the financial data access market by entering into these data-sharing agreements (see our announcements with USAA, Wells Fargo, Fidelity, Capital One, and JPMorgan Chase). We currently maintain market coverage of approximately 95% of U.S. deposits and investments under management and, at this writing, 40% of that coverage will be based on direct API access. Our leadership in the direct data agreement space reflects our commitment to partnering with banks to provide the best data and the best experience for our shared customers.
While this agreement with U.S. Bank comes after much research, thought, and dialogue, it is not the end of the journey. Rather, it is the beginning—a gateway to new opportunities, new products, and new possibilities.