How to verify income: 3 methods
Income verification used to be a manual process requiring hours to gather, sort, deliver, and verify income documents. In addition to being time-consuming, the process was easier to manipulate. For example, an applicant might doctor their pay stubs to make it look like they earn more.
Today, however, the process is almost always done digitally — which is both faster and more secure. There are three methods for digital income verification, each with pros and cons.
1. Link bank accounts
In this process, the applicant links their bank account via an API, which extracts data to summarize income streams. This low-friction process makes it easier for applicants to prove income from gig jobs and other sources. Since most people know their banking credentials, this process is generally smooth.
However, accuracy depends on the quality of machine learning models used to categorize income streams. In some rare cases, income may be misclassified or missed.
2. Document upload
Document upload is the most similar to the old manual income verification process. Rather than sending in physical documents, applicants can scan or take a picture of their documents and submit them digitally.
While this process might seem to invite fraud, it can actually be quite secure. After uploading documents, Plaid reviews the documents for dozens of signals of fraud. However, the document upload process can become complex if applicants have multiple bank accounts or income streams, and there is a slight increase in fraud risk.
3. Partner with payroll platforms
This is the most accurate income verification process, as the information is pulled directly from payroll platforms like Workday or ADP. Users enter their payroll credentials into Plaid, which then pulls payroll information directly from the source. Using this method, Plaid is able to verify income for around 85% of the US workforce in seconds.
Although this process is highly accurate and secure, not all applicants know what payroll provider their company uses. Additionally, some companies may use unsupported payroll platforms.
Plaid Income allows property managers and owners to offer all three verification processes in one API. By allowing applicants to choose the process that best fits their needs, you can streamline the process, reduce fraud, and verify income faster.
