As open banking frameworks continue to encourage bank-FinTech collaboration, the financial services market is exploring new ways to unlock data — not only with banks, but with each other.
That means financial functions beyond banking are taking advantage of application programming interface (API) data integrations, with productivity gains particularly large for business end-users of these products and services.
In a financial function like payroll, the opportunities to unlock data are vast, said Hitendra Patil, director of practice development, and Harvinder Vasir, chief technology officer at accounting and payroll technology solution provider AccountantsWorld. In a recent interview with PYMNTS, the executives discussed how changing expectations among accountants, their corporate clients, and their clients’ employees have driven a data integration evolution in the payroll arena, a space that is intrinsically connected to other areas of the back office.
“Client expectations have started changing,” said Patil, “and people got used to consuming information on their cellphones from wherever they are.”
That shift has bled into the human resources management arena, where today, employees are driving a self-service model of HR that enables workers to access their payroll and other HR information themselves. As Vasir explained, this enables employees to not only take control of various HR functions, including benefits management, taxes and retirement fund contributions, but at the broader level, reconnects those employees to having control over their own data.
This was the motivation behind AccountantsWorld’s latest API, a data integration capability that connects the company’s payroll service provider-facing payroll platform into any other third-party HR solution. It’s a two-way data connection reflecting the close relationship between HR and payroll, and targeting the burden of duplicate data entry that so often impacts HR and payroll departments.
Unlocking Data, Unlocking Opportunities
Two-way data integration between payroll and HR platforms are certainly a natural fit, but as Patil and Vasir highlighted, that’s not where the opportunities for payroll data integrations end.
Vasir pointed to data integration capabilities between paycheck withholdings and 401(k) management platforms, for example, another reflection of the drive toward the self-service business model.
For corporates and their accountants, the opportunities in data integration between payroll and accounting and tax portals are similarly vast.
Patil also highlighted the impact of open banking in this space, a model that has also introduced the opportunity for payroll service providers to take advantage of this seamless flow of data to facilitate bank loan applications for their clients, for example.
“There is this opportunity to integrate and securely and privately expose the relevant data to the relevant people on demand,” said Patil.
The impact of open data and data integration frameworks on the payroll sector is only one of several industry shifts the market is witnessing today.
Vasir said the drive toward faster payouts and real-time access to earned wages has introduced new use-cases for faster payment networks in the payroll space. He highlighted The Clearing House’s recent decision to raise the threshold limit for RTP transactions from $25,000 to $100,000.
“That will affect the payroll industry, and the expectation for speed is growing,” Vasir said.
A New Data Security Paradigm
As the payroll sector tightens its relationship with the banking arena through bank data integrations and faster payment rail capabilities, payroll service providers will also be prioritizing another emerging trend in this space: security. Data integrations between FinTechs, and between a FinTech and a bank account, require elevated data protection due diligence, and with payroll a fraud-prone market, pressures to safeguard sensitive company and employee information will continue to grow.
By the same token, however, the data integrations that may elevate data security pressures are also the technological capabilities that can strengthen the payroll sectors’ security initiatives.
Both Vasir and Patil highlighted opportunities in blockchain to enable secure data integrations between payroll platforms and bank accounts to verify payroll service providers’ new clients, client accounts and client employees — as well as the opportunity in faster payments to not only address employee payout needs, but support employers’ and payroll service providers’ emerging data security pressures.
“The most important part of the payroll workflow is onboarding clients because who you onboard is how risky your business is,” Vasir said. “Blockchain could play a big role in identifying those people, identifying their transactions… With more faster payment networks, you can get real-time data telling me that this bank account actually exists, how long it’s been in existence — all of this plays a great role in identifying risk.”
Data integrations today are the new normal, not only for payroll, and not only for the corporate financial services arena. As Vasir noted, data connectivity is a must for all verticals, with payroll just one space taking advantage of emerging opportunities for process efficiencies, elevated data protection and beyond.
“It’s pertinent to every industry,” he said. “Systems cannot limit data in silos anymore, and the availability of technology and security processes available today allow for real-time decision-making, real-time data exchange, real-time analysis. It’s happening in literally every industry.”