Discover how Truv is transforming the lending industry and giving consumers more control over their financial data in this insightful FinTech interview.
Kirill Klokov (Co-Founder & CEO) founded Truv to put data back in the hands of consumers. Truv covers more than 150 million Americans with over 12,800 unique integrations to payroll providers, employers, and gig platforms. Truv has also expanded its vision and scope by unlocking access to tax data, transaction data, and insurance data.
What led you to start Truv?
I experienced the inequality of the current financial system firsthand. I immigrated to the U.S. and attended Stanford Business School for my MBA before successfully leading product organizations at several start-ups.
I recall applying for a loan for the first time. I had a solid, high-paying job with a great education, but I had a 520 credit score. Consequently, 14 financial institutions said no, and 1 said yes, but at a 15% APR. This was when it dawned on me: someone needed to change the way financial decisions were made. This seminal experience was the catalyst for Truv and the foundation of what we’ve built over the past three years.
What challenge is Truv solving?
The financial system as we know it is largely controlled by credit scores. For loans, in particular, credit scores are determinants of someone’s ability to repay debt. This, sadly, is not a complete measure and creates financial inequality for consumers. To try to combat this, some lenders have moved to collect income and employment data to augment a traditional credit score. This in turn has been proven to reduce risk and open up lending opportunities to segments of the market that were previously ignored.
Unfortunately, the income and employment verification industry is monopolized by a single organization that purchases consumer data en masse without consumer consent and resells it at a large profit. Prices from this vendor are skyrocketing by increasing approximately 20% every six months, putting lenders in challenging positions with declining margins.
We are directly solving both of these problems by providing financial services organizations with access to every consumer-permissioned financial data source available to reduce verification costs while providing access to all of the necessary data points to underwrite with confidence.
Can you break down your solution and the various offerings
Truv’s market-leading consumer-permissioned data platform provides financial organizations with access to every financial data source available to make more informed decisions. We currently support the following five solutions:
- Income and Employment Verification – Verify income and employment details for 90% of the U.S. workforce with 4+ data sources reducing risk, fraud, and verification costs.
- Employment History Verification – The most cost-effective and efficient way to verify employment history for background screening use cases with 4+ data sources available.
- Insurance Verification – Quickly verify the status of a consumer’s auto or home insurance policy to further automate the loan approval and onboarding process.
- Direct Deposit Switching – Automate the direct deposit switching experience through Truv’s connections to payroll accounts to drive deposit growth and cultivate engaged customers.
- Paycheck-Linked Loans – Create a winning partnership between lenders and their customers by setting up recurring payments directly from customers’ paychecks.
We’re also constantly innovating on our consumer-permissioned data platform. Over the next year, we have five new products that are forecasted to launch and be added to the platform.
Can you explain the privacy issue consumers deal with when taking out a loan?
Absolutely, as this is a large problem that many U.S. consumers are unaware of. Today, when consumers apply for a loan, lenders often try to verify their income and employment. One verification method is through instant databases that purchase personal consumer information in batches from payroll providers and large employers, and in turn, sell that data back to lenders. Unfortunately, lenders and consumers are forced to take on this additional cost.
Today, consumers have no say or control over what personal information is shared with these instant databases or lenders. This information even contains highly personal information such as a consumer’s social security number. I strongly believe that consumers should own their data and be able to both authorize and deauthorize access to their data at any point in time.
Outside of the U.S., we’re seeing nations come together to give consumers more control of their own data with open finance laws being passed in Europe and Canada. I predict that this trend will continue in the United States as open finance regulation is absolutely necessary at this point.
The bottom line is: payroll providers shouldn’t be selling financial data without permission from consumers. Truv is on a mission to give consumers power over their data.
Is there any regulation around the way data on consumers is sold to lenders?
As I mentioned, unfortunately, there is very little regulation today in the U.S. around the selling and purchasing of consumer payroll information. This is a large income source for payroll providers, and they are free to determine which organizations they want to sell consumer data to. Regulation is absolutely necessary for this industry.
What makes Truv stand out from the competition?
We actually ask this question of ourselves a lot, and we rely on our 150+ customers to tell us why they choose to partner with Truv. In general, we’ve seen four main areas that our customers have emphasized as differentiators for Truv.
First, Truv provides market-leading coverage that no other data aggregator can match. Through our payroll connections alone, we’ve built 12,800+ unique integrations to access over 90% of the U.S. workforce with 2.3 million employers in our database. By combining this strong coverage with all of our other data sources (financial accounts, tax data, insurance data, and document processing), Truv’s coverage is second to none.
Second, our authentication experience creates a seamless login experience for the user. Truv’s focused on enabling the lowest friction experience in the consumer credential experience. For this on our payroll connections, we support 43 unique single sign-on providers and have logged into over 200k companies in the last 12 months. Moreover, 95% of traffic that flows through our payroll integrations is API-based creating an experience that’s fast, secure, and long-lasting. With our other integrations, a majority of them are API-based as well.
Third, Truv provides the highest data quality possible through our consumer-permissioned data platform. This includes high 90% fill rates on key fields and providing the longest history of data in return from a successful connection.
Lastly, here at Truv, we focus on creating a solution that’s easy to implement. Our platform offers a full suite of products to verify consumer data, meaning lenders and financial institutions don’t have to purchase multiple tools to accomplish the same goal. We also offer out-of-the-box integrations with 3rd party tools used by banks and lenders. This all together makes managing the implementation of a verification process simple and easy.
What trends are you seeing in the lending space, especially as they relate to the economic headwinds?
Unfortunately, the current economic headwinds have created significant challenges for lenders. On the mortgage side, interest rates have skyrocketed to over 7% that have plummeted mortgage purchase volume. In 2022, overall purchase volume has decreased by 62% relative to volume in 2021. This has had a large impact on margins for mortgage lenders.
Similar trends are happening in personal lending, but more directly influencing default rates. In the past year, default rates in unsecured personal lending have risen to 4.14% which represents a 38% increase from the previous year. Moreover, default rates are expected to reach 6% by EOY 2023.
Because of these unique challenges in the industry, lenders are hyper-focused on driving profitability and increasing margins.
How do you see the lending space evolving in 5-10 years?
In the next 5-10 years, I’m a strong believer in increased regulation in the U.S. for the use of consumer financial data. Based on open finance laws in other nations, consumers own their data and should be able to authorize and deauthorize access to their data.
When this happens, payroll providers will have to completely rethink the way they distribute their data, and API solutions like Truv will already be positioned to handle the additional market demand. This outcome will give lenders access to data that paints a 360-degree view of their applicants.
For lenders, this will allow a reduction in risk and costs which will ultimately lead to lower default rates and higher profitability.
Tell us a bit about your culture. What makes Truv’s culture unique?
I’m a strong believer that the Truv culture is the people on our team. We currently have over 70 team members that work on Truv’s consumer-permissioned data platform on a day-to-day basis.
On that note, there are six main pillars of our culture that we’ve established:
- Solve Customer Problems: Always obsess over customer problems.
- Take Action: Be proactive and get things done even when it’s “not your job.”
- Be Resourceful: Act as an owner and stay accountable.
- Advance Daily: Understand how you can improve on a daily basis.
- Unite: Work collaboratively with your peers and customers.
- Recognize & Reward Success: Being relentless at accomplishing your goals.
In aggregate, everything that Truv strives to do is as a partner, not a vendor.