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Jul 03, 2024

Understanding Income Verification for Businesses

Income verification with VIDA's Income Verification is crucial for streamlining financial services in verifying loan applications.

Income verification is a crucial process for financial companies to verify the income of their users. It involves collecting data on an individual's salary or income and is essential for companies like P2P lending, leasing, or credit cards.

Traditionally, income verification has been done manually. However, in the digital era, solutions like Income Verification simplify the verification process, saving time and costs.

 Why is Income Verification Important?

Half of Indonesians believe exaggerating income on loan applications or insurance claims is normal. According to a FICO survey, 25% of respondents admitted they would exaggerate their income in certain situations, and 15% considered it normal.

Reports noted 13,338 suspicious transactions related to fraud in 2020 and around 23,000 in 2021. While not specifically highlighting income fraud, this data shows increased fraudulent activity in the financial sector, including potential income falsification. Meanwhile, data from OJK shows the default rate faced by P2P lending in 2023 exceeded 5%, dominated by the worker group.

A YLKI survey in 2022 found that 40% of respondents had difficulty accessing financial services due to strict income verification processes. This indicates that some individuals might feel compelled to falsify their income information to overcome this difficulty.

Additionally, companies still use documents like pay slips, tax reports, or other physical documents that can easily be manipulated. Not to mention, if the company has to repeatedly verify manually, it consumes time and effort. All these potential frauds and cumbersome processes can be simplified with Income Verification.

Benefits of Verifying Income 

Based on the reasons above, income verification through Income Verification plays a role in evaluating the eligibility of financial service users for the products they apply for. Additionally, income verification ensures that the information provided by prospective customers matches data from legitimate sources.

 Other Benefits of Income Verification Include:

1. Accurate Risk Assessment and Fraud Prevention

Digitally verified income data provides a clearer picture of an individual's financial situation, helping companies avoid fraud.

2. Reducing Default Risk

Income Verification helps prevent fraud and ensures that the applicant genuinely has the financial capacity to meet their payment obligations, which is crucial to avoid default risks that could harm financial institutions.

3. Fair Evaluation

Using Income Verification to verify income prevents overestimating or underestimating the borrower's capacity to repay the loan, ensuring the funds are disbursed in the right amount.

4. Operational Efficiency

Modern consumers tend to seek companies with easy and secure processes. For companies, having advanced technology aims to minimize errors, enhance user security, and save time and operational costs. Automating income verification with Income Verification can reduce manual work, improve decision-making ease, and enhance user satisfaction. Data shows that digital income verification reduces processing time by 80%.

5. Legal Protection

The income verification process provides legal protection for both financial service providers and applicants. With clear and verified documents, both parties have strong evidence in case of disputes.

6. Access to Accurate and Real-Time Income Data

Financial services get access to accurate and real-time income data to ensure the applicant's eligibility. This benefits financial services by allowing quick and precise decisions, providing insights into their users.

Use VIDA Income Verification

Income Verification is an enhancement of VIDA Verify products. This solution is an additional layer of fraud prevention for financial institutions in assessing users, especially for credit assessments.

This income verification service uses data sources focused on formal sector employees identified with NIK (National Identification Number).

VIDA Income Verification offers income verification services through an API available 24/7. Moreover, the real-time verification process takes only an average of 2 seconds and uses authoritative, legitimate sources for all formal sector employees in Indonesia.

VIDA Income Verification provides three main responses:

- NIK check (match or no match)
- Income range
- Company name check (match or no match)

VIDA Income Verification streamlines the income verification process, reduces fraud risk, and ensures accurate and timely financial decisions, enhancing the overall efficiency and security for multi-finance, leasing, and lending companies.

How VIDA Income Verification Works:

1. Application Submission: Users submit a loan or insurance application.
2. Data Verification and Credit Analysis: User data is verified and analyzed for credit assessment.
3. Verification with Authoritative Sources: Income is verified with authoritative sources.
4. Verification Results: Verification results are conveyed to the financial institution.
5. Decision Making: Based on verification results, loan or insurance decisions are made.

In an increasingly complex financial world, income verification with Income Verification is crucial to prevent fraud and ensure fair and accurate lending decisions. VIDA Income Verification not only enhances security but also operational efficiency.

VIDA - Verified Identity for All. VIDA provides a trusted digital identity platform.

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