Apr 14, 2021

Wage secures $5m in funding round led by Google

Fintech
Payroll
wage
Google
Joanna England
3 min
Wage secure $5m in funding round led by Google
US fintech startup has been backed by Google’s AI venture fund to expand its innovative solutions...

The San Francisco-based fintech startup Wage, has raised $5m in a funding round led by Google’s AI venture fund, Gradient Ventures. 

Follow-on investment came from 8VC, Pear Ventures, Bloomberg Beta, CoFound Partners, and executives from SoFi, Public, Zillow, and Affirm. 

The infrastructure software solutions provider that lets users securely and easily share their payroll data with third parties without the need for document uploads or logins, reduces employers HR workloads. Wage was founded in 2018 and is part of a rising trend in the fintech space. 

Market competitors also offering income and employment verification solutions include Plaid, Pinwheel and Argyle, with adoption of the services having risen significantly over the past 12 months.

Wage APIs

Wage’s industry-leading Application Programming Interface (API) infrastructure reportedly delivers direct-source payroll data instantly, with a credential-less process as lightweight as a credit check. By leveraging direct data integrations with leading payroll partners, the company enables consumers to quickly and securely share their data with lenders, landlords, hiring managers, and countless other fintech apps. 

Since its launch, Wage has been quietly building its network of payroll partners. Co-founders Ben Prawdzik and Shaan Patel leveraged their experiences at companies including Gusto, Goldman Sachs, Box, and Bain Capital, designing the platform to meet the demands of the rapidly evolving fintech space. 

According to reports, Wage currently works with payroll companies covering more than 30 million employees who work at firms such as Amazon, Delta Airlines, Best Buy, Starbucks, Dell, Hyatt Hotels, and tens of thousands of others.

Customers using Wage’s API can reliably access payroll data at ultra-low latencies, and massive scale because the company’s integrations with leading payroll and HR systems are direct connections. This is in contrast to other startups in the payroll data market, who often access data by asking consumers to provide their payroll account username and password before deploying bots to log into the consumer’s account via the public internet - a process known as “web scraping.” 

A scraping-based approach has several drawbacks compared to Wage’s direct-access model: consumers often can’t remember their payroll login information, and bots often fail when payroll systems deploy anti-scraping tools or change their websites.

Payroll solutions

Ben Prawdzik, CEO and co-founder of Wage, explains, “Historically, payroll data access has been a burdensome process for financial services providers, consumers, and employers. Our solution is comparable to a credit check. We completely remove the friction point of relying on consumers or their employers to act, whether uploading a document, entering data, taking a phone call, or going through a login flow."

Prawdzik said that Wage is designed with security and transparency at its core. The company uses enterprise-grade encryption, is Fair Credit Reporting Act compliant, and SOC 2 Type 2 certified. Wage doesn’t bulk-download payroll data, but instead routes it on a one-time basis from payroll systems to the specific third party a consumer has authorized. By comparison, legacy solutions from credit bureaus often warehouse vast quantities of consumer data under failure-prone security protocols and opaque consent practices. 

Zachary Bratun-Glennon, a partner at Gradient Ventures said, “A great deal of credit decisioning is a black box that penalizes people with little-to-no credit history and doesn’t capture one’s full potential. Wage provides accurate and up-to-date payroll data seamlessly and securely - creating a more equitable and inclusive financial ecosystem, and empowering consumers, financial services, employers and others with efficiency and control over the use and access of their data.”

He added, “Wage has seen impressive growth since its inception, and we look forward to supporting its momentum.” 

Share article

May 10, 2021

Open Finance: The future of data sharing

openfinance
datasharing
Cybersecurity
Technology
William Girling
7 min
Commentators from TrueLayer, Nutter, and Zilliqa Capital help us understand the value of data sharing and why Open Finance could be its future
Commentators from TrueLayer, Nutter, and Zilliqa Capital help us understand the value of data sharing and why Open Finance could be its future...

Data: What is it good for?

Although most of us probably don’t consider it as such, data could be regarded as one of the most recyclable commodities on Earth. Every day, consumers produce it, companies collect it, extract the value, transform it into actionable insights, and then create new products and services for the market. From here the cycle continues, and the results it’s produced for financial service institutions (FSIs) so far have been favourable.

Data sharing can be best understood as a consent-based agreement by which privacy is waived in a limited capacity for commercial purposes. Customers gain products that have higher relevance to their lives while FSIs reap enhanced marketing and development opportunities. In Deloitte’s article ‘The next generation of data sharing in financial services’, the overall FSI benefits of data sharing are summarised into three categories:

  1. Inbound data-sharing (acquiring data from third parties) = enriched decision-making.
  2. Outbound data-sharing (sharing owned data with third parties) = enabling companies to draw on capabilities otherwise undeveloped within their own organisation.
  3. Collaborative data-sharing (inbound and outbound sharing of similar forms of data) = allowing companies to create richer, larger and more comprehensive datasets than siloed efforts could achieve. This is particularly important as forming ‘data lakes’ becomes more popular.

And yet, despite the mutual beneficiality of data sharing, there still exist several potential drawbacks and aversions to overcome. For customers, there is a persistent reluctance to share sensitive data - Statista found that approximately 44.3% of US fintech app users experienced some degree of discomfort, whether related to account balances, loan history or investment information. Worse, a Harris Poll survey conducted on behalf of IBM found that only 20% of respondents “completely trust” organisations to properly maintain their data. With incidents of compromised security involving major companies like Capital One and Microsoft still making headlines, this is, perhaps, not unsurprising.

Benefits of sharing data

For institutions: better decision-making, access to third-party capabilities, greater scale of data

For regulators: support for innovation and competition, enables effective system oversight

For customers: access to higher quality and more efficient products

Drawbacks of sharing data

For institutions: competition hindered by lack of secrecy, could breach privacy regulations, could potentially alienate customers by appearing ‘omniscient’

For regulators: possible breach of customer privacy

For customers: personal data could be mishandled or misused

(Above from World Economic Forum) 

Data sharing is also not without risks for FSIs themselves; creating such a forthcoming environment could erode competitivity by handing too much information to rivals, complex and evolving privacy regulations like GDPR and PSD2 could be breached by unforeseen tech developments, or companies could simply alienate clients by appearing too omniscient for comfort. 

Among VC firms and investors data sharing is an important decision-making component, particularly during early-stage investment. Michael Conn, Chairman, CEO, and Co-Chief Investment Officer at Zilliqa Capital, explains, “It is important that the target investment team be open and willing to share the data reflecting their performance to date, the market opportunity and any other metrics that would help demonstrate why they are a better investment than another in the same space.” However, at the same time, Conn clarifies that the value of data today can sometimes be overemphasized; for Zilliqa Capital, the quality of a potential investment’s team is often more of a determining factor. “The fact is that most, if not all businesses, will at some point be forced to pivot away from their initial plans - see Amazon. It is just not possible for data analytics, at least as of now, to prove itself superior to gut instinct when evaluating the quality of an investment target’s team.”

If not fully utilisable as a resource for decision-making, then, what’s needed is a re-evaluation of data sharing, both in terms of its place within modern finance and the methods by which its present shortcomings can be overcome. Open Finance and API (application programming interface) technology could represent such an opportunity. 

Open Finance’s value proposition

“Open Finance is all about empowering customers,” explains Jack Wilson, Head of Policy and Regulatory Affairs at TrueLayer. “It gives customers the ability and the right to re-use their financial data in new and innovative ways. It does this by giving a role to third-party providers, who securely retrieve data and put it to work for the customer.” These actors can do so in a variety of ways, such as:

  • Consolidating multiple held accounts into a unified view
  • Facilitating electronic data transmission that eliminates the need for physical documents when applying for financial products 
  • Using account data as a form of identity verification

These capabilities are utilised in one of Open Finance’s most widely discussed aspects: Open Banking. Defined by McKinsey & Co as “a collaborative model in which banking data is shared through APIs between two or more unaffiliated parties to deliver enhanced capabilities to the marketplace,” Open Banking allows for a more direct consumer-bank relationship. The APIs themselves can be of three distinct models: public, partner and internal, each of which has specific functions and benefits. Regarding the latter, these include overall cost reductions, increased operational efficiency, enhanced innovation through collaboration with developer communities, and greater security.

“Consumers are increasingly demanding financial data aggregation services through APIs because it makes personal financial management much easier,” says Thomas J. Curry, Co-Chair of the Banking and Financial Services group at Nutter and former US Comptroller of the Currency. “Banks and fintechs each want to be the primary portal for financial services and they are competing to keep or obtain the customer relationship.” 

Types of API

Public: APIs used by external parties to develop new apps and products. These often facilitate innovative results as a consequence of broader community engagement.

Partner: These APIs create a more integrated connection between business partners, suppliers, etc. They offer better security, lower operating costs, and enable API monetisation opportunities.

Internal: Only used by developers within a single enterprise, internal APIs offer cost reduction, better efficiency and greater security. However, they also lack the potential with regards to integration and innovation.

(Above from McKinsey & Co)

“Open Finance, which broadens out the types of accounts accessed, could offer yet more benefits for both customers and companies,” adds Wilson. He cites the following:

  1. Aggregated savings and investment data, bringing more holistic financial oversight to consumers.
  2. Granting access to data that can bring value-added services, such as financial advice, “robo-advice”, better ID verification, and KYC.
  3. Empowering third parties to carry out fund transfers between customer accounts (savings, ISAs, investments, etc) and initiate account switching.

Security: The elephant in the room

Carried out in its most ideal form, then, Open Finance’s benefits for both customers and companies makes it an attractive proposition. However, there remains what McKinsey calls the topic’s “elephant in the room”, security. Data sharing in any capacity should be a central concern, with each dataset’s value accorded an appropriate level of protection, and customers need to understand how and why some data is used. “[I]nformed consent requires understanding the implications of sharing before approving —no small feat when the reflexive clicking of ‘I Agree’ on an unread set of terms and conditions is standard,” said McKinsey in ‘Data sharing and open banking’. Curry believes that cybersecurity and the protection of data form the major concerns for fintechs and banks regarding APIs’ functionality. “[In the US] Section 1033 of the Dodd Frank Act makes it clear that consumers have a right to their financial information. Some progress has been made in developing voluntary standards for APIs but regulatory clarity is needed. The Biden CFPB (Consumer Financial Protection Bureau) will likely develop a more concrete regulatory framework for APIs.”

Therefore, it seems clear that, in addition to general clarity regarding data sharing policies, what customers really need are examples that demonstrate why APIs are beneficial and what Open Finance can do for them.

A recent collaboration between TrueLayer and UK digital bank Monzo provided one such demonstration. With customers using Open Finance as a payment method for online gambling, Monzo needed a solution to protect its at-risk customers by blocking transactions to certain gaming sites. TrueLayer was brought on board to implement an enhanced API capable of notifying the bank whenever a customer with gambling restrictions on their account attempted to pay via Open Finance. TS Anil, Monzo’s CEO, praised the API and stated that it was “simple to build, proven to work, and will help protect hundreds of thousands of people.” The finance industry’s accumulation of such examples will be pivotal in convincing consumers that data sharing can be responsible and useful for safeguarding them.

Data sharing through Open Finance is ultimately a path towards greater convenience, better products and services, and significantly cheaper operations for FSIs. Making sure that customers are aware of these benefits, concludes Wilson, will be the aim of the game. “At the very least, dealing with physical paperwork and documentation in financial transactions will become a thing of the past."

Share article