In the past years, you may have noticed a new approach that promises to revolutionize how we verify income, assets and other important financial information. This method involves retrieving data directly from the source via APIs and could potentially eliminate the need for traditional document review processes in many cases. No more fake payslips? However, like any new technology, it comes with both promises and challenges that we are going to explore in this article.
Understanding source data and its role against fake payslips
This new approach is called “source data”, or “brondata” as it is known by in the Netherlands, and it refers to the practice of retrieving financial information directly from authoritative sources such as government entities and banks, via a consent from the person sharing the data. Companies like Datakeeper, Ockto and Qii are pioneering this technology in the Netherlands.
Here’s how it typically works:
- Users (e.g. someone applying for a loan) get a request to connect to one of those apps and log in using secure identification mechanisms (e.g. DigiD in the Netherlands).
- The system retrieves relevant data from various sources, including tax authorities, social security agencies pension providers or banks.
- Users review the collected data and consent to share it with the requesting party.
- The data is securely transmitted to the financial institution or service provider. No PDF documents are exchanged.
This approach offers several advantages:
- Increased accuracy: Data comes directly from the source, reducing the risk of manipulation or errors.
- Speed: The process can be completed in minutes, streamlining applications for mortgages, loans or car leases.
- Reduced fraud: Since documents aren’t manually submitted, the risk of document fraud is significantly lowered.
The promise of direct data sourcing
The potential of this technology is immense. It could revolutionize how we apply for mortgages, car leases, loans and rental homes without the risk of fake payslips. Imagine being able to complete a mortgage application in under 10 minutes, with the lender having instant access to verified income, tax and asset information. There is no chance of fake payslips coming through, as no document are requested. This is already a reality in many European countries, and the introduction of eIDAS and Digital Identity Wallets will only stimulate the adoption of this technology.
For financial institutions, this technology offers the promise of faster processing times, reduced risk of fraud, and potentially lower operational costs associated with document verification. In fact, many of the companies that we have talked to are excited about lowering operating costs by fully adopting “brondata” in their customer onboarding processes. Having to detect fake payslips manually may be a thing of the past, or so it seems.
Challenges and limitations
However, as with any new technology, source data is not without its challenges:
- User experience issues: The process often requires multiple logins (one login per source consulted) and the use of an app on a smartphone running a recent version of Android or iOS, which can be cumbersome for some users. There are also privacy concerns associated with this level of data sharing.
- Limited applicability: This system primarily works for individuals with an established history in the country. Expats, students or recent immigrants may be excluded from using this service.
- Data currency: Some information sources may not be updated frequently. For example, tax filings are typically annual, meaning that in May 2024, you might be looking at income data from the 2022 fiscal year.
- Non-mandatory nature: As the use of direct data sourcing is not mandatory, there is still a need for traditional document submission in many cases, potentially leaving room for fake payslips.
The need for multiple verification methods to detect fake payslips
Given these challenges, it is clear that while direct data sourcing represents a significant step forward in detecting fake payslips, it is not a complete solution on its own. A robust verification process should accommodate different scenarios:
- A fully automated direct data sourcing process for those who can use it.
- A traditional document review pipeline for those who can’t use direct data sourcing or in situations where it is not applicable.
It’s important to note that these methods are often mutually exclusive. Coming back to our Dutch example, if someone connects via DigiD and provides data directly from governmental sources like UWV and Belastingdienst, there’s typically no need to ask for additional documents, as the risk of then receiving fake payslips is negligible. This allows companies to have a way to verify and assess all sorts of candidate profiles efficiently.
VerifyPDF recommends the use of Datakeeper, a company started and owned by Rabobank, the leading Dutch banking group.
Special considerations for real estate
In the case of home rentals, the limitations of direct data sourcing are even more pronounced. In large cities, a significant portion of tenant candidates may be coming from abroad or moving due to a job change. In these scenarios, data from governmental sources may not be available or relevant. In Amsterdam, over 60% of tenant candidates in the liberalized rental segment are changing jobs and have not yet started their new roles. Asking the government for proof of employment data or connecting a bank account is useless in that situation.
For these cases, alternative verification methods become crucial. An employer statement or employment contract may be more useful in the absence of social security data or local bank transactions. This highlights the need for flexibility in verification processes, especially in dynamic urban rental markets.
Conclusion
The rise of direct data sourcing via APIs represents an exciting development in income verification without the risk of fake payslips. While it offers significant advantages in terms of speed, accuracy and safety, it is not without its challenges and limitations.
As we move forward, the most effective approach will likely be one that accommodates both direct data sourcing and traditional document verification methods, using each where it’s most appropriate. This flexible approach will ensure that financial institutions and real estate companies can serve all customers efficiently and securely, regardless of their circumstances or background, while avoiding the dangers of fake payslips.
The future of financial verification lies in adapting to diverse needs and scenarios, leveraging the strengths of new technologies while maintaining robust processes for cases where these technologies aren’t applicable. By embracing this diversity of methods, we can create a more inclusive, efficient and secure financial ecosystem for all.
