But it might still be quite challenging for consumers to direct where their payroll funds go when choosing services that best meet their financial requirements. Cornall explains in a blog post that changing where direct deposits go is “usually a manual and time-consuming process for both financial institutions and end-users.”
For instance, in order to transition income to a new banking service provider, many customers have to fill out a bank-provided form to collect their new account information, and then need to bring that particular form to their employer. She adds that when using a paper-based process, there’s usually “little to no clarity around when their paycheck will start flowing to the new account, which can leave the user feeling anxious and perplexed.”
Cornall points out that for financial services providers or institutions, “high-friction onboarding experiences can lead to user drop-off and inactive accounts—and can ultimately prevent banks from becoming a user’s primary financial institution.” The team at Plaid believes that there’s “significant opportunity” that exists for “expanded innovation that leads to better user outcomes.” Plaid can help by developing the Fintech infrastructure that aims to bridge the gap between financial institutions and payroll information, beginning with direct deposits.
“[Plaid] is excited to announce … Deposit Switch, a new product, currently in beta, that makes it faster and easier for users to establish or change the destination of their paychecks. By automating direct deposit account funding, banks can optimize their account funding flows, and ultimately increase customer lifetime value.”
As mentioned in the update, Deposit Switch from Plaid has been “optimized for conversion and coverage.” It provides instant and fallback methods for users that are setting up recurring account funding.
The Plaid team added:
“Our proprietary instant switch method connects a user’s payroll or employer account directly through Plaid Link. Instant account funding is available for employees at large and small companies, as well as gig economy workers. For users unable to utilize our instant switch method, we’re building a fallback method. Users will be able to ask Plaid to contact their employer on their behalf to update their direct deposits – no forms required.”
Liran Zelkha, CTO, Lili, which offers banking services for freelancers (like no-fee early access to wages with direct deposit), said that Fintech has “given people more choices to find what works best for their specific money management needs.”
Zelkha also noted that Plaid Deposit Switch is helping his company with streamlining the account funding process, which will “give customers a better experience and should also benefit our customer acquisition and retention.”
Ben Doyle, Co-Founder, Yotta, remarked:
“Yotta helps customers develop better financial habits by making it easy and fun to build and grow their savings. Working with Plaid, we’ve made it faster and easier for customers to take the first step by establishing and funding their accounts with direct deposit. Yotta also integrates with Plaid Exchange, so customers can securely use their Yotta account with other fintech apps for digital payments, financial planning, investments and more. Fintech is the new normal for most Americans and Plaid helps Yotta meet customers where they are.”