Income Verification APIs
A developer's perspective on how to select and maintain an income verification API.
Verifying your customer's income is crucial for making sound financial decisions and plays a large role in the customer journey. Choosing the right income verification service and implementing it effectively has a high impact on your conversion rates.
Drawing on our experience with implementing dozens of income verification APIs, this guide will explore your options and guide you toward the best solution for streamlining customer underwriting, onboarding, KYC processes, and fraud prevention.
What Are Income Verification APIs?
Income verification APIs are the unsung heroes of FinTech. They integrate diverse data sources—from payroll providers to bank accounts—to verify a customer's income in real-time, enabling automated decision-making. These services add significant value by adapting to evolving income streams, such as those from the gig economy, ensuring accurate data capture. They excel in classifying income types, safeguarding consumer privacy, and verifying information accuracy. As a result, you can trust the decisions derived from the data provided by these APIs and feel confident integrating them into your product.
Common Use Cases for Income Verification APIs
Income verification APIs are integral to FinTech applications across verticals:
Personal loan underwriting and insurance: enable instant income verification that accelerates the approval process without compromising risk management
Mortgage lending: simplify complex documentation, leading to quicker and more reliable decisions
Property management: rapidly confirm a tenant’s income for rental applications
How Income Verification APIs Work
At their core, income verification services do two things: data acquisition and validation.
Data Acquisition: Income verification providers gather data directly from payroll providers or through consumers who choose to connect their bank accounts (‘consumer opt-in’), payroll details, pay stubs, and other financial records. Both approaches share a common theme: they are highly selective about their data sources to minimize the risk of overstating a customer’s income.
Data Validation: Each service uses its own proprietary methodology to validate that the income data is accurate – often a mix of algorithms that classify transactions & detect anomalies and humans that review edge cases. This is typically a ‘black box’ that is difficult to assess without testing the service with real-world data.
Each vendor employs unique tactics, but the initial consideration when evaluating income verification services should be: what kind of customer experience do you want? If your customers are hesitant to share their information, partnering with a service that already has an income database is likely your best option. Otherwise, you should consider a 'consumer opt-in' service, since it can enable you to serve a broader range of customers. But, keep in mind that there is no such thing as a free lunch, and services like Equifax charge a premium in exchange for a ‘one-click’ experience where users simply need to provide a SSN.
Popular Income Verification APIs
If you search for income verification APIs, you'll see an endless list of services all boasting real-time, accurate, secure, and simple income verification.
These services are sticky - once you embed one, good luck ripping it out - so it's no surprise there's so much competition. FinTech heavyweights like Plaid and Equifax are the big names, but there are many others that deserve consideration.
How to Choose the Right Income Verification API
When selecting an income verification API, consider the following:
Coverage: You need to know your customer and ensure that your income verification API is pulling data from the sources, and specifically the exact financial institutions, where your customer’s income is reported. This is particularly important if you’re serving customers with income that isn’t tied to a large payroll provider, such as gig workers and sole proprietors, or customers that don’t use a traditional, large bank. Most vendors have pages on their site with detailed coverage information, with some vendors having status pages for each bank they connect to, but if you require a less-popular source, we’d recommend testing it to make sure the vendor actually supports it.
Cost: Unfortunately, most of these services don’t advertise their pricing, so you need to engage directly to get a quote. An important question to consider is, what do your economics look like if a lot of customers drop out of your funnel after being verified? You need to make sure your cost structure won’t be upside down if approval rates are below expectations. Another important question is, who is the target customer of the service? Equifax, for example, is known to be a high-priced offering, which makes sense given their target customer is mortgage providers who don’t mind paying up since they generate so much revenue from each customer.
Ease of integration: Every service has reasonable documentation; that’s table stakes in this day and age. And modern vendors tend to have richer documentation. That shouldn’t be your main selection criteria, but keep in mind that when something breaks, you’ll likely be looking to the documentation for help.
Additional product lines: Most of these services have additional offerings, such as employment verification, account balance checks, and payments. There can be significant cost benefits to using one vendor for multiple services, so look for vendors with portfolios that align with what you need.
Reliability & support: Similar to cost, this is hard to assess until you’ve used the service or talk to someone who has used it for a while. Our best advice is to do your own diligence, and try to understand the vendor’s data supply chain. Most vendors use the same endpoints provided by banks. That means quality of service can fluctuate greatly when the bank makes a change or has an issue. Some vendors, such as Teller, have clever workarounds where they connect to the ‘front door’ via the bank’s mobile app, which gives better data quality & coverage, while being less prone to downtime. Understanding these dependencies is important for understanding the risks you’re assuming.
Implementation Best Practices
Once you’ve selected a vendor and are ready to implement, some things to keep in mind:
Rate limiting: Once you have some initial success with a vendor, you’ll be letting more people in the company use the API. It just takes one data scientist’s script to go off the rails to start bumping into your rate limit and make your costs explode. Be prepared for this scenario with smart rate limiting based on your forecasted usage.
Error handling: Vendor documentation is a good starting point, but the docs rarely tell the full story. Be prepared to spend at least a few months after implementation uncovering new scenarios that you need to handle gracefully and identifying the stuff that’s just noise, like alerts that a customer disconnected their bank account.
Caching: Want a quick way to save 10%+ off your monthly API bill? Get smart about caching requests so that you don’t pay multiple times to reject the same applicant. Just be sure to check your vendor’s TOS to know what’s allowed.
Monitoring: Logging anomalies is table stakes. More importantly, you need to translate those anomalies into plain-English so your team isn’t wasting time on false alarms and so you can make your user experience more robust by creating product flows, such as asking users to reconnect to the service, that resolve the root issue.
Failover: It’s inevitable that your integration will break – either because of how you implemented it or an issue on the vendor’s end – or you’ll have a customer stuck because their bank isn’t supported. You need a process in place, even if it’s human-driven, so customers can continue to onboard & use your product. Aggregators claim to be a panacea, but what if they have their own emergency? Unfortunately, failover just isn’t something you can totally offload.
Documentation: After implementing an income verification API, you’ll quickly be onboarding another 10-20 APIs. Clean internal documentation is essential to being able to scale your stack.
About Supergood
We built Supergood to cut through the maze of third-party API integration and maintenance.
If you don’t want to spend your evenings troubleshooting vendor schema changes, responding to false alarms, or answering exec emails about cost surprises - reach out to us at hello@supergood.ai. It only takes five minutes to install Supergood and start getting your time back.
These third-party integrations should just work as described - you have enough of your own code to worry about.