Verix API Digitizes Income Verification ProcessBy Dasmer Singh
Ben Prawdzik and David Winer, two current second-year MBAs at the Stanford GSB are on a mission to transform the income verification process. Together, they founded Verix, the first company to digitally provide lenders with comprehensive applicant income data in under a minute. I sat down with Ben, who walked me through this bottleneck in the loan application process and the extraordinary progress he and David have made in solving it.
Verix: Introducing the Product
The Verix API (Source: verixapi.com)
Have you ever needed your income verified for a third party? Whether signing a lease or applying for a loan to purchase a home, getting your income verified is anything but a streamlined process. Verix is a fintech startup that enables banks to automatically verify your financial documents and expedite lending.
Verix makes these processes vastly less painful for both the applicant and the verifying entity. The product is integrated directly with lenders’ website or mobile application. During the income verification step of consumer loan applications, the applicant digitally submits their basic identifying information to confirm their identity. Verix then retrieves the applicant’s historical income information, including key documents like the W-2, K-1, and 1099, through a unique set of data integrations. The lenders are billed based on the number of income verification requests.
Small business lending: The state of the industry
Today, financial institutions must hire credit analysts to spend hours examining paystub uploads, old tax records, and direct verification requests with corporate HR departments to verify a loan applicant’s income. This process is incredibly slow, expensive, and technologically obsolete. In mortgage lending, the industry-standard income verification workflow takes 5 to 10 days. It can even fail entirely if there are minor typos or omissions, such as an incorrect borrower zip code. Any error triggers a re-try, forcing the process to start from scratch. Because income verification creates a major bottleneck in loan approval processes that have otherwise been digitized, it is cited as a major paint point for borrowers and adds excessive overhead time for mortgage lenders which are legally obligated to verify incomes.
Furthermore, the income and employment verification market is a lucrative one: Prawdzik stated that it is estimated to be $3 to $5 Billion in the United States alone. Income verification is not only used for loan and lease applications, also as a means for background check for prior work verification, investor accreditation, and some legal filings.
The Verix team: Finding their niche
Cofounders Ben Prawdzik and David Winer met at Stanford in the fall of 2017 during the the first few weeks of their MBA program. They instantly clicked and shared a desire to experiment with a side project. Prawdzik, who worked at Bain Capital before business school, had experience taking fintech software companies to market. Meanwhile, Winer brought the technical expertise, having an B.S. in Applied Math from Brown and a Master’s in Computer Science and Electrical Engineering from UC Berkeley. The two of them realized they could use their complementary skill sets to make lending easier.
In Winter 2018, Prawdzik and Winer enrolled in Steve Blank’s Lean Launchpad class.
“In the course, we had hundreds of conversations with financial services personnel and found a common frustration with the archaic and time-consuming nature of income verification”
– Ben Prawdzik, Verix Co-Founder
Next, the cofounders reached out to the IRS to explore options to digitize the process, developing a key partner in the agency to support the building of Verix API.
Scaling their services: Verix’s plans to grow
In Spring 2018, Verix was accepted to Cardinal Ventures, a selective Stanford-based accelerator backed by partners at Sequoia, Accel, and Lightspeed. They were also admitted to two summer programs by Pear Ventures in Palo Alto and Index Ventures in San Francisco. These equipped the team with office space, guidance, and key introductions to additional large online lending companies this past summer. Currently, Verix is enrolled in the demanding StartX accelerator, where they receive customized coaching from serial entrepreneurs as well as access to investors.
Verix has also received significant inbound interest from customers.
“So far, we have integrated its software with five lenders, all of which are now benefiting from a competitive advantage in speed and efficiency of processing”
– Ben Prawdzik, Verix Co-Founder
Since the company consists of just the two co-founders, Verix has raised less than $100,000 to date through an uncapped note. Looking ahead, Pradzick states, “as customers start going live over the next few months, we aim to build out an engineering and customer success teams and hope to raise a new round of funding in early 2019.”