Open payroll connectivity… if that sounds like a very random mix of words, you’ve come to the right place. These words taken individually actually are not so random. Everybody is familiar with payroll and connectivity. And you probably have heard of open finance or open banking. But that’s what we do at Fintech Review, decrypt and demystify the fintech world. Connecting the dots to make it simpler to understand what is going on in fintech. We’ve asked a few questions to Maximilian Czymoch about what Mistho is doing in the open payroll connectivity space.
Tell us more about Mistho. What is your elevator pitch?
mistho.io offers an API, that enable consumers to easily access and share their salary and employment information with third parties. That can be as banks, insurance companies, lenders and others at the click of a button. With our solution, we drive better conversion for our fintech partners and at the same time reduce fraud and operational verification costs.
What is your background and what is the story behind the company?
Previous to Mistho I was building a company in the e-mobility space offering a subscription for electric kick scooters and electric bicycles. As part of the business model we had to run various KYC checks on our potential customers. That was including verification of their identity via their passport/ID card. As well as verification of their ability to pay via a confirmation of their current employment status and salary in the form of their payslip.
Despite our efforts, we saw high fraud rates with users either not paying or not returning the asset rented to them with relatively few legal and operational options to recover the vehicle.
In particular fraudulent documents (faked payslips) were a common problem. These documents as of today cannot be 100% verified and the data is crucial to take accurate credit risk decisions. Most players (we are talking banks, leasing companies, landlords and many others) resort to tedious manual verification processes. These are typically very labour intensive or they price the risk of fraud into their product. Which essentially increases the prices for all their customers. With Mistho we set to solve exactly this problem. We are building a solution that allows a fully secure and riskless way to confirm a potential customers employment and income data. We do that via a direct connection to their current payroll portal.
What is open payroll connectivity?
Open payroll connectivity refers to the idea that a user should have the ability to share his or her payroll data with any third party. And be able to so in a consent driven and 100% trusted format with partners of his or her choice. Essentially open payroll is part of the open finance movement. It holds a deep believe that consumers have the fundamental right to share their financial information directly with third parties from the systems where this information is stored today.
The goal here is to break up information silos across financial services (e.g., banking, asset management and insurance). That will enable consumers to access better, cheaper and faster financial services.
What problems are you solving with Mistho?
At the core of what we are building at Mistho is the question of how to generate trust. And how to reduce friction in financial transactions. All major transactions in the life of a consumer like you or me typically require building up trust between the parties involved. Think about buying or renting a house or getting car finance.
Typically the major information required to build trust from a lenders perspective concerns
- the identity of the user
- and the ability to pay of the user
Our solution specifically enables an accurate assessment of the users ability to pay. We do so via 100% verified access to the payroll information contained in an employees payroll portal.
With this information a partner can assess where the individual works and how much the user earns. Both their recurring earning e.g., base salary as well as non-recurring items e.g., over-time or bonuses. Thus partners using Mistho can reduce fraud risk and decrease existing manual income verification costs. Also, the way the solution works reduces friction as it makes the consumers life much easier and convenient. Think no more manually e-mailing pdfs to partners!
Any innovation in fintech more broadly that you are really excited about?
Beyond our vertical in payroll, there are a variety of innovations happening that I see significantly improving consumers lives. One core example alluded to earlier is open finance in general. While open banking is the first step, we see that in the near future consumers should and will be able to access and share all their financial information (e.g., asset management and insurance and of course payroll information) directly via APIs and based on their explicit consent.
This can drive significantly more transparency for the consumer. As well as better services as new companies can build on top of this infrastructure. Beyond open finance, I’m very bullish on embedded finance solutions that enable consumer brands to offer fintech offerings (think credit cards or bank accounts).
Any plans for the future or product roadmap you want people to know about?
I think for now we are really on day 1 building out the first version of the infrastructure that lenders need across Europe. While income verification is a powerful use-case, we see additional larger opportunities that can be addressed through payroll access in the medium to long-term.
For now we are fully focussed on making verification perfect across geographies but building out more deep use-cases is something that is definitely on our roadmap.