This article was updated on January 30, 2024.
Income verification is a critical step in determining a consumer’s ability to pay. The challenge is verifying income in a way that’s seamless for both lenders and consumers. While many businesses have already implemented automated solutions to streamline operations, some are still relying on manual processes built on older technology.
Let’s take a closer look at the drawbacks of traditional verification processes and how Experian can help businesses deliver frictionless verification experiences.
The drawbacks of traditional income verification
Employment and income verification provides lenders with greater visibility into consumers’ financial stability. But it often results in high-touch, high-friction experiences when done manually. This can be frustrating for both lenders and potential borrowers:
- For lenders: Manual verification processes are extremely tedious and time-consuming for lenders as it requires physically collecting and reviewing documents. Additionally, without reliable income data, it can be difficult for lenders to accurately determine a consumer’s ability to pay, leading to higher origination risk.
- For borrowers: Today’s consumers have grown accustomed to digital experiences that are fast, simple, and convenient. A verification process that is slow and manual may cause consumers to drop off altogether.
How can this process be optimized?
To accelerate the verification process and gain a more complete view of consumers’ financial stability, lenders must look to automated solutions. With automated income verification, lenders obtain timely income reports to accurately verify consumers’ income in minutes rather than days or weeks. Not only does this allow lenders to approve more applicants quickly, but it also enables them to devote more time and resources toward improving their strategies and enhancing the customer experience.
The right verification solution can also capture a wider variety of income scenarios. With the click of a button, consumers can give lenders permission to access their financial accounts, including checking, savings, 401k, and brokerage accounts. This creates a frictionless verification experience for consumers as their income information is quickly extracted and reviewed. Retrieving data directly from financial accounts also provides lenders with a fuller financial picture of consumers, including those with thin or no credit files. This helps increase the chances of approval for underserved communities and allows lenders to expand their customer base without taking on additional risk.1
