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5 minutes read

The Unique Value of Payroll APIs

By Robert Kazmi
payroll apis
By Robert Kazmi
5 minutes read

Income and employment data are vital to a new wave of financial service providers. To access payroll and HR data, startups and organizations need a reliable payroll API. However, there are several different types of payroll APIs.

If your organization is interested in accessing payroll data to create new financial products, it will need a different payroll API than the organization that wants to simplify payroll processing or gain greater insight into payroll data. 

In most instances, APIs are relatively straightforward. For example, if you want to add a map feature to your digital product, map APIs make this possible. However, payroll APIs don’t always do the same things. 

This post will explore the different types of payroll APIs and examine the unique value proposition each type of payroll API can provide your organization. 

Using Payroll Data to Deliver New Services

New financial management solutions rely on the employment data that payroll APIs deliver. Your organization can utilize a payroll API in several different ways, from improving internal payroll systems to developing new financial health products that utilize payroll integrations.

Payroll APIs come in three primary varieties: 

  • Embedded payroll solutions 
  • Access to payroll data to power financial products 
  • Payroll data management solutions 

Embedded Payroll Solutions  

Embedded payroll solutions deliver payroll services to your applications. This type of payroll API can be used internally to handle the payroll needs of your organization, or perhaps you use the white label services from payroll providers to improve the horizontal or vertical SaaS your organization sells.

Payroll APIs of this type provide services from payroll companies and enable businesses to handle all their payroll needs. In addition, embedding payroll in the SaaS products your organization sells makes your product more valuable to customers, increasing brand loyalty and reducing customer churn. 

In addition, if you have applications your organization uses for internal purposes, integrating a payroll API can make the lives of your employees and management teams easier. Some of the biggest payroll APIs of this type include Gusto, Check, and Zeal. 

Access to Payroll Data to Power Financial Products 

FinTech companies deliver unique services to help users take control of their money. Income verification is at the heart of these new services; this requires access to payroll data. 

A few examples of innovative financial products that are powered by payroll data include:

  • Paycheck-linked lending – This is a new and effective way for lenders to write a loan. Not only can they write a loan based on the borrower’s earnings, but they can also get loan repayments directly from the borrower’s salary. Paycheck-linked lending grants access to credit for more people while reducing the risk lenders assume. 
  • Direct deposit switching – Employees might get a new bank account, but direct deposit switching is often a complex and lengthy process that requires HR and payroll systems to work together. Direct deposit switching can be simplified with the use of a payroll API. Employees can quickly switch their direct deposit to the bank account of their choice. Direct deposit switching makes employees’ lives easier and gives them greater control over their finances. 
  • Income and employment verification – Relying on traditional credit scores can push many people out of the loan market. With a payroll API, lenders can write loans based on employment and income verification. This opens the lending market to more customers and enables lenders to confidently expand their businesses. 

If your organization wants to build an innovative new product that uses financial data, there are several ways payroll APIs can be utilized to improve credit decisioning and give users more flexibility with their bank accounts. 

If your organization is interested in a payroll API like this, Plaid, Pinwheel, and Argyle are the most popular solutions. 

Payroll Data Management Solutions 

Workforce management is made more difficult when ERP data and employee data are not connected. The final type of payroll API connects HR systems with the rest of your organization’s tool stack

Where is the value in collecting data if it is not uniformly distributed across the tools your organization relies upon? For example, while payroll data might not add much insight to the consumer permissioned data your organization collects, it can help your business plan for expenses, investments, and make strategic decisions. 

After all, for most organizations, the most significant expense is payroll. If payroll data is not actively integrated into your decision-making processes, how can your organization hope to make the best decisions? 

The top APIs for this type of solution are Newcraft and Finch. 

Payroll APIs Deliver Personalized Finance Services 

Modern consumers crave personalization. Traditional banking products are inflexible and impersonal. FinTech companies and other developers are using the capabilities of payroll APIs to deliver personalized financial services that meet consumer needs in new ways. 

Earned wage access is one of the more impressive and popular capabilities a payroll API can provide new banking services. Instead of waiting two weeks to get a paycheck, earned wage access allows users to access the money they have already earned, even before payroll is processed.

FinTech solutions are rapidly changing consumer expectations, especially among younger millennials and Gen Z. If your organization operates within the financial sector, it is time to start considering how it can reach and retain consumers in these growing demographics.

Final Thoughts 

There are many ways a payroll API can be utilized. However, it is essential to remember that these APIs do many different things, so carefully review an API’s capabilities before paying for key access. 

If you want to learn more about payroll APIs or your organization needs help choosing the correct API for its application, contact an experienced FinTech development partner like Koombea for help.

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