By Nikki Washington
If you’re at all involved with consumer lending or loan originations, lately you’ve seen a lot of coverage--articles, press releases, social media posts--about new entrants to the verifications space. Even some less-new players seem to be ramping up their focus on helping lenders verify potential borrower employment and income information. And we’ve gotten into the mix with bolt-on acquisitions that help expand the type of verification data available to credentialed verifiers. So there is quite a bit of new. Some might wonder how we at Workforce Solutions (the unit of Equifax that delivers income and employment verification services,) feel about all the new buzz. I’ll tell you: We love it!
The Value of the New Guy
Newcomers and expansion to the world of income and employment verifications are a good thing. First, it signals that the market for third-party verifications is alive and well. Businesses have reopened, and pent up consumer demand is driving behavior from retail sales to car purchases. Second, lenders and others that make business decisions based on a consumer’s employment and/or income understand how important these verifications can be. Industries as varied as auto and mortgage to consumer finance and even account management use employment verifications to help them make informed decisions about borrower and potential borrower ability to repay a loan.
Savvy lenders have long appreciated the value of real-time insight into their consumers' employment and income history. Economic fluctuations and uncertainty only serve to reinforce that value. Our Research shows (don’t worry--it’s just a short video), that the economic effects of the COVID-19 pandemic impacted even the coveted prime borrower cohort’s ability to repay loans. Before the pandemic, lenders might have automatically qualified a potential borrower with a 750 or better credit score for a loan. Now, lenders who are shown a high credit score have learned they might not have enough information to make an informed lending decision.
New market entrants also help keep established businesses on their toes and spur innovation. Nobody has all the good ideas at once. The dynamism of the income and employment verification industry keeps everyone highly focused on new product and service innovation. Continuous improvement means ever better solutions to benefit businesses and the consumers they serve.
And, the entrance of new players to the income and employment verification marketplace is a sign that businesses believe the economy will continue to improve, leading to more opportunities for businesses to offer financing for their products and services. That, of course, is good news for all of us.
But There is Always A “But”
Any successful business realizes that it’s not always a smart decision to go along with something just because it feels shiny and new. No matter how good it looks.
For example, one of the new entrants to the verification space touts its connection to payroll provider data for instant access to income and employment information. BUT when you look closer, it’s clear their coverage is limited. In contrast, at last count, The Work Number® provides access to over 119 million active records contributed by more than 1.2 million employers of all sizes. If a record is not immediately available via The Work Number, Workforce Solutions can easily pivot to a research-based verification solution. You can save yourself the time, effort and expense of having to waterfall from one provider to another to get the information you need.
Some new third-party verifiers try to address the issue of coverage by requiring consumer credentials to access payroll. This access allows the verifier to back into consumers’ income and employment history. BUT collecting information this way can be a hassle for consumers. The Work Number can be 100% frictionless for consumers. It generally does not require the consumer to do anything other than have the business need that gives the lender permissible purpose to pull their employment or income information.
Another issue to consider is record availability and access. It is valuable to understand what providers offer in terms of other key features such as security, solution variety, scalability and accessibility options. More about that later.
Here’s the Plug
If you hadn’t guessed, this is a proud promotion for the verification solutions made possible via The Work Number Number.
Let’s start at the beginning. Unlike many of the new verification solutions touted by other providers, The Work Number platform was purpose-built to address a business's income and employment verification needs. It wasn’t an add-on product, and it wasn’t an idea recently conceived to capitalize on the growing importance of verifying consumers’ ability to pay back a loan. It was developed with the singular purpose of reducing the burden on companies and consumers to verify employment and income when consumers applied for things like car or mortgage loans, purchased consumer goods such as a dishwasher or computer or opened a credit card or mobile phone account. From the beginning, employers recognized the value and cost-savings of having a third party act as the source of income and/or employment verification for their employees.
Even with a clear employer value proposition, getting employers to provide access to their sensitive employee data is not easy. Employers must be assured that their employees’ information is protected. Employee information should only be made available to credentialed verifiers that demonstrate that they have permissible purpose to obtain the information. Only verifiers that show they have the legal (as allowed under the Fair Credit Reporting Act (FCRA)) permission to access a potential borrower’s employment or income can obtain it.
At a time when both consumers and businesses are thinking more about financial inclusion and concepts like unconscious bias, The Work Number can be viewed as a way to support the goal of fairness in business. As an automated source for verifying consumer data, there is no human (with or without their own conscious or unconscious biases or agenda,) involved in making the decision about when or what information is shared. And no data is manipulated.
And that’s not just a “feel good” concept. 91.5 million consumers in the U.S.--often those in historically underserved communities--have thin or no credit files or have insufficient information in the file to generate a traditional credit score. So lenders relying solely on credit scores to make lending decisions are missing out on an entire population that could positively impact their bottom line.
That’s why having millions of employer contributors to The Work Number is a significant achievement. Your business needs the ability to verify as many of your borrowers and potential borrowers as possible--now. While we welcome, and even encourage new verification providers to join the marketplace, you have to decide if you are willing to take a chance on the shiny, new or if your business deserves what’s been tried and true.
When New IS Better
Don’t get me wrong. While, as a business leader, I’d always opt for the long-proven product or service, I would also expect continuous innovation. The Work Number has you covered there, as well.
In addition to the new and ongoing overall growth of the number of employer contributors to The Work Number--representing over half of the U.S. non-farm workforce*--the type and size of employers making data available via the platform has also changed. Fortune 500 organizations have been a mainstay of The Work Number contributors and now, there are more medium and small businesses than ever before. In addition to some of the largest corporations, employers from the corner bakery to startup tech firms make their payroll information available to credentialed verifiers via The Work Number with the goal of easing their employees’ access to the consumer products and services they want.
There are also a number of new Verification of Employment and Verification of Income product enhancements available through The Work Number. For example, options like All Employers Within 24 Months, Mortgage Ultimate and Employment Select were specifically designed to provide the employment and income verifications needed at key milestones in the mortgage origination process. They also may allow lenders to take advantage of certain GSE (government- sponsored enterprise) validation programs. (Only Equifax is listed as an Authorized Income and Employment Report provider on the Fannie Mae website.) The Work Number ID validation solution was developed for consumer finance lenders, and several solutions created to help clear lender stipulations were designed for the auto space. New and shiny. And valuable to verifiers in their respective industry.
So Now What?
Since you already know the ability to verify consumer employment and income is a critical component to making ideal lending decisions, the real question becomes: “How do I choose the best third-party verifications provider for my business?” I am glad you asked. Here are five key factors to consider when making that decision:
Some Things Get Better With Time
Just like a good wine or a solid friendship, some of the new verification providers joining the marketplace may get better with time. They’ll learn about your industry and they’ll add more employer contributions and provide access to more records. But you have verifications to perform and loans to close today.
The Work Number has 119 million ways we can help right now.
*U.S. workers in the economy that excludes proprietors, private household employees, unpaid volunteers, farm employees, and the unincorporated self-employed.