[00:00:00] Rich: Good afternoon. This is Rich Alterman broadcasting live from FinTech Meetup for our last session of the LendingLink today. And I'm happy to be joined by Matthew Gomes, General Manager of Consumer Lending and Banking with Argyle. Welcome.
Matthew: Thank you. Thanks for having me.
Rich: Well, thanks for joining me. So I'm sure not everybody listening today is familiar with Argyle. So why don't we start off with, give you the opportunity to talk about Argyle and, and what type of products and services you provide.
[00:00:28] Matthew: Yeah, absolutely. so Argyle is the leading payroll API platform in the market. and what we do is allow individual consumers to share income and employment data with financial institutions. Most common use case is for income and employment verification as part of the underwriting process. Yeah, we work across industries. I lead again, consumer lending and banking. I've got a counterpart mortgage. We've really seen a lot of traction, both in the mortgage space, small dollar lending. Now, the primary value prop is that we automate a really painful process. Certainly on the mortgage side, you need years and years of data. You have to gather it. Someone has to look at all of it. It's a very cumbersome process. We're able to automate all of that. The consumer lending side, generally these folks are looking for, their emergency loan may not have that pay stub on them when they go to apply. And so what we do there is we allow that individual to actually secure the funds, complete verification in the branch on the spot. There's no need to go find a pay stub. That's really the bread and butter use case of what we do.
[00:01:30] Rich: In your use case, is it more often that it's not really about verifying the income on the application? Is it really more front end in the waterfall?
[00:01:39] Matthew: No, we, we, we do definitely sit in the, in the verification part of the decision. So typical, typical kind of deployment folks are going to run a soft credit check. Yeah. They're going to make sure that your credit qualified past business rules, oftentimes after that, you'll get to either an incomer and blended verification and that that's kind of where in the waterfall we sit. So yeah, post kind of soft credit decision pre-funding.
[00:02:03] Rich: Okay. So, earlier today, I met with Equifax, a member from the work number group, and 1 of the things we talked about is that, well, really 2 things that we've seen this almost explosive growth. In the space for verifying income and employment, it seems like I was talking to somebody. It seems like last year, every month we were learning about some new company that was in space. And the other thing is that no one really has a hundred percent coverage. Yeah. So it's really more complimentary services sometimes. So what have been some of the trends that you've seen and why do you think so many companies have been jumping into this space?
[00:02:42] Matthew: Yeah, I think the highest level macroeconomic condition, I think more folks are verifying more applicants, almost agnostic or product type.mWe're even seeing demand for having conversations with credit card issuers who aren't necessarily verified income when they're making the initial decision. It's more of a credit line management tool for them. They're verified at a much greater percentage. I think the other reason that we're seeing a kind of surge in demand, frankly, is that prior to payroll APIs existing really TWN or the work number was, was the only solution out there that had really accurate data. And to be honest, it's cost prohibitive in a lot of use cases. Upwards of 80, 90 a hit. That's great. If it's a mortgage, you're making hundreds of thousands of dollars. Not so great. If you're extending a 3, 000 loan. Yeah. I think actually making the data more available has helped drive that demand. And, from where I'm sitting, we've also just benefited a kind of challenging credit cycle and a rising interest rate environment, but I'm still looking for, for every bit of margin that we get.
[00:03:45] Rich: Right. Right. So, when we think about open banking, when it first came out, a lot of it was screen scraping. and now of course you have APIs, any similar evolution in the, the, the income and employment space? Yeah. So,
[00:03:58] Matthew: It's, it's interesting. A lot of the data that we provide actually isn't screen scraping. So we're reading. So I'm the API that a robot form has, there are a handful of exceptions where it's not made available to a certain field where maybe we have to render the paste of it and be able to go extract the piece of information. But we're already, I think, further along as an industry than, banking operators were for probably five or six years.
[00:04:25] Rich: So obviously, GDS and Argyle are partners. Yeah. and I've had the opportunity to review your API spec. And one of the things I was interested in is given that you started out with a lot of, in a gig worker environment where I may have many jobs that are bringing income, do you do anything to take that raw? In common data and put it in any type of summarization?
[00:04:49] Matthew: Yeah, we do. So I think, uwe, we have two products or two features that really meet that. The first one is what we've termed the digital paste up. So agnostic of whether someone's a gig worker, 1099 W2 salaried hourly doesn't matter. we're going to roll that up and present it in a very similar format. Whether you consume it from the API or whether you have underwriters actually logging into our platform, looking at it, it's going to look the same regardless of payroll platform. so that, that's, that's definitely been a value add for clients. Beyond that, we also have reports as a feature. certain folks, they're, they're going to want to look at just base pay. Some folks are, are, only looking at gross. And they're, they're doing a lot just consuming, integrating directly with the API. We also have a lot of folks that are just looking for exactly as we've described, kind of summary data to go with, yep, Matt makes within 20 percent of what he said on the app. Let's clear the steps and move on. so we introduced reports about a year and a half ago, and have a number of them out there. I think the most commonly consumed one is our verification of income and employment reports. It gives you a two year look back so you can really kind of see that quality of earnings over time. We also have a day one certainty ready version of that report in the mortgage space. we're the only credentialed platform to have ever gotten that stamp of approval from Fannie Mae. so we make that available for our clients as well.
[00:06:08] Rich: When the data is returned, maybe helping the audience understand how granular am I seeing the gross pay, taxes coming out, 401k, do I see what bank it's actually going into as well?
[00:06:20] Matthew: You do. Yep. The overall majority of cases you do. so you get a full walk down from gross to net pay. We do that not only on a pay period by pay period level, but if you go back to the report I just mentioned, we also do it at the aggregate level. I touched on some folks only wanting to underwrite base pay. It's a really variable rate of pay from month to month. That person's inherently a little riskier to lend to. That's one of the shortcomings of banking beta. It's extremely granular. We can read all deposit destinations, both active and prior destinations. So I know, from prior to my time at Argyle, when I was at Opportunity Financial, we operate in that non fine lending space. And one of the challenges we always had there was figuring out how to underwrite folks that banks with some of the neobanks. Much higher rate of fraud. So it's kind of changing account to now bank to bank and it's a lot harder to actually debit that account in the future. so that's one of the data attributes that we make available that folks have found really valuable.
[00:07:15] Rich: Now is your, is your data SCRA compliant?
[00:07:18] Matthew: It's a, it's a, a, a tricky question to answer. I'm going to lead with, I'm not a lawyer and this is not legal advice. But from my perspective and our perspective, it, it is FCR, right, FCRA compliant, pardon me, as I said, where we typically sit in the waterfall, it's at the verification stage, it's not in the credit system itself, and so you can decline in an FCRA compliant way based on the data that we make available to you, it's just not going to be used in the credit decision that's being used to have the verifications. I would also say that, every, every kind of requirement that exists for a data provider that the FCRA lays out, the regulations lay out, we meet or exceed those fully, fully encrypted data, in transit and abreast. Yeah, we, we, we check all those boxes and again, not a lawyer, not legal advice, FCR compliant.
[00:08:08] Rich: So your solution is a permissioned solution. Yes. So I need to know how to access my peril, which if I don't do it frequently. Sure. I might have to go look it up somewhere. Yep. And as a gig worker, I may have jobs with multiple companies that are all using different payroll solutions. So, kind of walk me through that journey. Like, are you actually asking that applicant, is this the only Sure. Payroll source you have, like,
[00:08:37] Matthew: how does that work? It's a great question. So that's configurable. We have clients that only want folks to connect a single source of income, the last primary source of income based on a decision on that. We also have folks, certainly the background check space where they're asking folks to connect, employers going back seven years to complete that background check. so if it's configurable, we support both, I think to your point about, consumers, maybe not knowing their credentials, the way, the way we kind of think about that is, is twofold, surprisingly to me, prior to working in Argonne, and I know this 55 percent of the U.S. workforce is actually hourly, not salary, that includes folks like doctors, surgeons, nurses, they are hourly and folks that are shift based, they're in their platform, If not weekly, potentially even daily, they're scheduling shifts, they're checking hours, checking earnings. So those folks know their credentials and very, very high rate that leaves you with the remaining 45%. And I probably like you to fall into this bucket. I do not know my rippling credentials. I will confess. I do not know that. So the way we've approached that is, just meeting consumers as many bites at the Apple to be able to convert. We've invested really, really heavily in supporting single sign on as a login method. so I know my Google, Google credentials, I use them every day at work. So I'd be able to credential in via Google. The other thing that we've done and that we're starting to introduce across more integrations, we've started, allowing folks to credential in, in a passwordless way. Those air quotes for all of you listening, I know you can't see. and, the way we're doing that, we started with ADP, we rolled it out there. We're going to do this for the next 5 to 10 and it's kind of the largest payroll providers. What we're effectively doing is recycling our password reset flow. So instead of needing to know your credentials, you can type in your name, either email or phone number and, and effectively get an MFA code, create a new password and be able to credential in that way. Yeah, there's some real advantages to taking that approach versus some others that we looked at. And the biggest one is that the token we get back there, the token that's created there, allows us to keep that session length persistent, and live for a long period of time. So you're able to read all the data in there, you're able to get confirmation if a deposit switch takes place, something like that. so that's how we've kind of approached that. Just giving people a sweaty bite at the Apple.
[00:10:47] Rich: We talked about a summarization earlier, three main bureaus all offer now trended data. are you, are you showing any trends of, So
[00:10:56] Matthew: That's a great leading question. We're, we're not today. So, you start getting into building scores or summary trends, things like that. You're, you're close to being a CRA and I think regulators look at you a little differently. it's something that we've thought about. We've talked about it internally. Figuring out how do we add more value for our clients and do things like that. So it's not something we do today. I will say it's something that we're routinely advising our clients on. Kind of talking them through what your credit policy say, what's the right way to extract that from the data set we make available and kind of help people through that process.
[00:11:37] Rich: So, obviously Originations is a big use case for your platform. Are you seeing adoption in other areas like collection, for example? Maybe I'm doing a settlement with a consumer and I say, Hey. I want to verify your income before I make a decision on how I'm going to settle it. We have.
[00:11:55] Matthew: Yeah, there are very short answers we have. I think there's been a rise of really interesting fintech companies out there that are doing debt settlements. Where they're negotiating with existing creditors to get you a lower, lower total principal amount repaid. And to your point, they need to be able to count on your ability to repay after they've made the settlement. And that's even more true if they're distributing the funds or dispersing the funds to the consumer, not the existing creditor. So we are seeing some demand there. And actually, interestingly, another place we've seen a lot of demand is tenants. I think, historically, it was basically a credit poll and maybe you had to submit a bank statement if you were iffy. more and more of these kinds of larger landlords, The companies that have stepped into that space. They're verified income on 80, 90, 100 percent of their, their kind of tenant applicants. So I'm definitely seeing some new interesting use cases that weren't where we were focused probably 12, 18 months ago, and love to see people figuring out new ways to use the data.
[00:12:53] Rich: So I didn't mention that, you're actually based out of the UK. Argyle have any plans to try to expand beyond the U S I think,
[00:13:04] Matthew: after we've conquered the U S market and fully scaled, I would love to think about expansion to, to other geos. we've had a, I had partnerships in the past in Canada, we've dabbled up there. We think we have pretty strong coverage, but, but the reality of what we've found so far is the demand just isn't really there. I think a lot of Canadian companies are a bit behind, certainly in, in underwriting sophistication where the U S is. so no, no immediate short term plans. We do open in the UK, it'll make my commute a little shorter, but, yeah, no, nothing in the near term.
[00:13:35] Rich: Good. Good. Any new innovations or products that you'd like to share that might be on the horizon?
[00:13:44] Matthew: I touched on one of them, again, we've already rolled out for ADP, this concept of passwordless login. The way we're kind of problem solving right now is we cover about 90 percent of the U.S. workforce. There's not a whole lot of juice left in the squeeze trying to get from 90 to 99 percent, They're all SMBs. It's a lot of work for not a whole lot of return. So what we're really, really focused on is getting our kind of end to end conversion inclusive of coverage as close to that 90 percent mark as possible. today, every 10 people that go through Argyle. Five and a half successfully backed and we're able to return data on. We want to get that closer and closer to 90. So we're really doubling down on this concept of passwordless credential and that's a huge focus for us. That's what we're going to invest a lot this year.
Rich: All right. Good. Good. Well, last question for the day, did you win or lose any money at the tables? I'm, I'm going to say no comment because my wife's listening to this. Well, I want to thank you for joining me today. U once again, this is Rich Altman with GDS is the lending link, broadcasting live FinTech meetup in Las Vegas. And we've been speaking with Matthew Gomes, who's the general manager of consumer lending and banking with Argyle and want to thank you for being our last podcast of the day. Rich, I really appreciate it. It's fun. Thank you again.
