As more consumers shift deposits, Plaid lowers one hurdle

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About a year after launching Plaid Income to help lenders verify prospective borrowers' cash flow, the bank account data-aggregation firm is adding resources to improve income-verification accuracy, battle income-data fraud and streamline the process for switching direct deposit to a new account.

To increase the reach of its income-verification service, Plaid has formed partnerships with payroll-data providers Pinwheel and Atomic Financial, Plaid announced Thursday. 

New York City-based Pinwheel and Salt Lake City, Utah-based Atomic will feed real-time consumer payroll data to Plaid, expanding the geographic reach and depth of salary information powering the San Francisco-based fintech's income-verification service, Plaid said in a press release.

Plaid's deal with Pinwheel includes referring businesses to access Pinwheel's direct deposit account-switching features. Both Pinwheel and Atomic provide API connections between consumers' payroll data and bank accounts, enabling consumers to quickly complete a task that can take days or weeks through some banks. 

The move follows the Consumer Financial Protection Bureau's June announcement that it plans to develop a new personal financial data rule to eliminate friction and delays when consumers try to change bank accounts.

Plaid initially will refer consumers interested in direct deposit account-switching to Pinwheel, said Brian Karimi-Pashaki, head of Pinwheel's partnerships. 

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Pinwheel is seeing growing demand this year from consumers seeking streamlined methods to switch the destination of their direct deposits as they move money to financial institutions that offer better terms as interest rates rise. 

"As evidenced by the huge deposit shifts we've seen in recent months, more consumers are interested in moving their money and want the ability to do that without the friction and delays account-switching can involve," Karimi-Pashaki said. 

Other fintechs, including providers of earned wage access, are also encouraging consumers to shift their direct deposit to gain real-time access to up to 50% of their wages before payday.

"Financial institutions and fintechs realize easing direct deposit account-switching is important for innovation across the ecosystem," Karimi-Pashaki said. 

Streamlining consumer access to account-switching tools makes sense at a time when consumers are changing jobs and may be nervous about their cash flow, said David Shipper, a strategic advisor with Datos Insights.

"Direct deposit of payroll is a major piece of the account-switching process. Many consumers will abandon a new account rather than risk making a mistake and missing a paycheck," Shipper said.

As part of its income-verification service improvements, Plaid also said it's introduced machine learning to battle rising incidents of consumers falsifying pay stubs, bank statements and certain tax documents to inflate their income.

In a recent study of 400 lenders, more than half of respondents said they had experienced some kind of document fraud in the form of doctored pay stubs, W-2 and 1099 tax forms and bank statements within the last year, said Rohan Sriram, product lead for Plaid's income products.

Plaid now includes a fraud score with every document it assesses as part of its income-verification service for lenders, he said. 

"As we scale and expand our product to enable more access to people, anti-fraud technology was a natural expansion of our income-verification suite," Sriram said.

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