Driving Competition, Inclusion With Verified Income & Employment Information

Today’s businesses and consumers are continuing to adjust to a whole new world that no one predicted or expected. The global pandemic has changed work forever – employers and employees alike are settling into and ultimately defining what will be the new normal. This evolving environment poses its own set of unique challenges for many, including credit unions.

At the onset of the pandemic, the country grappled with record job losses that peaked at 904,000 jobless claims in January 2020. While jobless claims continue to steadily decline, they are still above pre-pandemic levels. According to the U.S. Labor Department, jobless claims dropped to 400,000 in July 2021 compared to roughly 220,000 claims per week in March 2020. At the same time, consumers are leaving their jobs at historic levels. Employers posted a record 9.2 million job openings in May after some four million people quit their jobs in April in what many headlines are referring to as “the Great Resignation” or “Turnover Tsunami.”

Not only that, according to the CFPB, credit applications have largely rebounded to their pre-pandemic levels. When coupled with the unique employment trends we’re facing, this uptick in demand for credit is creating a greater need for real-time, verified income and employment information to make the most informed lending decisions.

Leveraging verified income and employment information can help credit unions mitigate risk, extend credit responsibly and unlock new opportunities for their businesses and members in our current environment and beyond.

Gaining a Competitive Advantage Through Data

Every day, lenders use data to guide their decision making and grow their businesses. While this is not new information, what’s changed in recent years is the availability, accuracy and diversity of data that is accessible to credit unions.

Credit data is still the most effective means for assessing the level of risk a member represents. Credit reports provide lenders with unmatched insight into a member’s risk profile by detailing their financial track record. At the same time, verified income and employment information can provide lenders with a clearer picture of a member’s ability to repay. Credit unions that leverage a more comprehensive view of a member’s financial situation by assessing both verified income and employment insights alongside credit data feel more comfortable and confident extending credit to a larger pool of consumers, opening more opportunities for members than those who rely on credit data alone.

It’s important to note that the way income and employment insights are gathered and deployed in credit decisions is key. Many credit unions have traditionally leveraged a consumer’s stated income or required extensive documentation, including W-2 tax forms, paystubs and more, to inform their credit decisions. The events of the last year and a half have contributed to a greater need for real-time and verified information about a member’s income and employment history from a trusted third-party source. With a consumer’s consent, new tools can provide credit unions with access to tens of millions of current, verified income and employment records contributed by employers and trusted payroll providers. These additional insights can empower credit unions to responsibly extend more credit to their members and in accordance with their own risk tolerance.

In addition to the current employment trends and uptick in demand for credit, the digital evolution of the last couple years has come with renewed member expectations for online experiences, which is also creating a unique set of challenges for credit unions. While members may have been more apt to walk into brick-and-mortar credit union branches prior to the pandemic, they are likely less inclined to do so now. Members want experiences that are digital, simple, fast and convenient, and financial institutions are focused on how best to meet consumer demand.

In fact, according to IDC’s Future Enterprise Resiliency & Spending Survey issued earlier this year, 31% of financial services firms indicated “improved customer experience/satisfaction” as a top three priority in 2021. This is another way real-time verified income and employment information can help. Streamlining the verification process by leveraging an instant verification tool can help expedite the application process and deliver a frictionless experience for members, leading to better member retention.

More Data, More Opportunities

Today’s credit unions are poised to take advantage of the unprecedented availability of expanded Fair Credit Reporting Act regulated data sets. This not only spells opportunity for credit unions and their businesses, but also consumers.

There are tens of millions of consumers who are either credit invisible or have thin credit files today. These consumers often lack fair access to credit, yet many have strong financial habits, including steady employment and income. Ensuring underserved consumers are not continually left without access to credit is a critical step to financial inclusion.

When verified income and employment information is coupled with insights about how a member who is managing their monthly telecom, utility and streaming service payments, or how they manage credit over time through score models, an even clearer picture of a member’s financial situation emerges.

Despite what some may think, harnessing the power of this expanded data doesn’t require an overhaul of existing processes or decision-making systems. While verifying income and employment has traditionally been a complex and time-consuming process, today, it doesn’t have to be. Credit unions have flexible options to integrate these additional data sources into their existing practices and can access this information in real-time from Experian in a variety of ways, including through an API or an online portal. Removing the friction in delivery and implementation can make it easier for credit unions to leverage expanded data. This is a win for credit unions and their members.

While it’s likely jobless claims and job openings will return to normal levels, driving financial inclusion and improving access to credit for more consumers remains a top priority for credit unions. Data is key to achieving this. Verified income and employment information can open a world of opportunity for credit unions while helping provide previously underserved consumers the access to credit they deserve.

Michele Bodda is the President of Experian’s Verification Business and is based in the Los Angeles area.