(00:00:05) - Welcome to The HR Tech Spotlight podcast. I'm Deanna Shimota, CEO of GrowthMode Marketing. The HR technology market is crowded, and we know it can be hard to find the best software solutions for your business in the sea of sameness. On this podcast, we shine a spotlight on some of the best up-and-coming technology options out there. Check it out if you are interested in learning about new, innovative solutions available in the market. And if you are with an HR tech company and interested in being considered for a guest spot. Stay tuned for details at the end of the show.
(00:00:45) - Welcome to a new episode of The HR Tech Spotlight. This time we are digging in to learn about Vault Verify, a technology platform to automate the process of completing verifications of employee income and employment. Joining me to talk about Vault Verify today is CMO Reese Nanfito.
(00:01:05) - Deanna, how are you doing today?
(00:01:07) - Great. Thanks for joining me. So tell us about your background in the HR tech space.
(00:01:13) - Well, I joined the HR tech space about two years ago when I joined Vault Verify as their head of marketing.
(00:01:20) - It's been a fascinating intro. It's a great company, well positioned within HR tech, but it's also been really exciting to learn about the environment and other players in the space and sort of the dynamics around HR tech. As a marketer, you want to learn about your audience and various options that they have. So it's been really exciting.
(00:01:44) - Let's talk about what Vault Verify does.
(00:01:48) - Well, I like to say Vault Verify has been creating value for HR since 2013, and it's amazing that we're a ten-year company now. But we do this by automating requests for verification of employment and verification of income. And it's done in kind of a unique way. We use an established real-time API integration with whatever our client's HCM platform is. That gateway, we call it the Vault Edge gateway. It eliminates the data storage offsite of all of the data from the employer. And it provides up to the second really accurate information. And so with our clients, they're able to eliminate labor costs, reduce data exposure risk.
(00:02:37) - And they get a very unique revenue share model where we can provide them funding for other air projects, which we'll talk more about. I'm sure it's a real easy implementation. It's really fast. It's not a major ordeal at all. But when I describe this DNA, a lot of people say, wait a minute, you're going to pay me to provide a service for me? What's the catch? Right. You know, uh, well, we pay them because it's it's it's your data as an employer. And so you receive a financial incentive, which is a portion of the revenue that we make actually through transaction fees with the verifiers, which are usually lenders. We share that back to you. And it sort of flips the prevailing model on its head a little bit. It's very unique. But once people are enlightened to this and and the data security benefits it offers, it all makes perfect sense to them. In fact, we have over 99% client retention over all those years.
(00:03:38) - That's excellent. And I know you and I have had many conversations about this.
(00:03:43) - You guys have a very unique model. And you mentioned, you know, the revenue share and being able to give back to your clients. Most air technology companies, when you're going and you're looking at the platform, there's a cost to use them. You guys have a totally different model. And I think that's important for organizations to understand. If you're listening to this and you have a need around this, that there are options out there that aren't going to break the bank.
(00:04:12) - It's completely free to the employer. And and we have a very transparent model where we can explain all of the dynamics of it. And, you know, we're kind of going in a new direction now where we're actively moving towards partnerships. So we have found like minded HR tech vendors that are focused on data security and, and want to, uh, provide services to employers. And so companies like Microtech for I-9 compliance and synergy for tax credits and Sedgwick for unemployment claims management. What we do is we enable them to access the HR data that they need to perform a service using the voltage gateway.
(00:04:57) - It's a secure gateway, so it's responsibly managed by us and approved by the client to benefit the employees. And what many clients choose to do is they take that financial incentive or that revenue rev share, and we use it to reduce the cost of the other services. So you can bundle you can, uh, be you can set up a very secure system to access the data and save money in the process. It's really kind of a nice combination.
(00:05:29) - You mentioned data security. Let's dig into that a bit. I know you have a lot to say about data brokers. Tell us more.
(00:05:39) - Yeah, well, I'll try to connect the dots because talking about data brokers doesn't necessarily fit with an HR discussion, but it's quite an intriguing story. Um, it's getting it's beginning to get exposure, as you see. And and that's one of the exciting parts, uh, that of, of me getting into the HR tech space is understanding this dynamic. It's a really big problem. But the good news is there's an easy solution.
(00:06:08) - And so first off, what is a data broker a data broker. We probably know it's a company that gathers, processes and then sells personal information to other companies. And so a lot of times this could be without a person's knowledge or consent. If you think about Facebook or Google, sometimes it's in the fine print. You also have companies that just actively monitor and gather info like Acxiom or Nielsen. And you interact with these services. They're free services, but then they take your data and they sell it. And you have to remember always, if you're not paying for the product, you are the product. Right. And so oftentimes it's the data that they're acquiring and then selling. And that's how they make their money. But in addition to this you have the credit bureaus like the big three nationwide providers TransUnion, Experian and then Equifax. Of course, Equifax are the owners of the work number that provides HR tech services. But all the credit bureaus are also registered data brokers. But it's important to know that not all data brokers are credit bureaus.
(00:07:19) - And so these credit bureaus do interact with the air space. And they very much have a revenue model tied around data. And I think that's important for HR executives to be aware of and to better understand.
(00:07:38) - How do these data brokers get all that information on employees?
(00:07:43) - Yeah, this is the fascinating part. So one of the many ways is through third party data sharing agreements. So in relation to HR you can really think of two areas. One is if a company hires an HR tech vendor, uh, who's often also a data broker. Right. They might hire that HR tech vendor to provide services. And those services might require the company to provide their entire employee data file each pay period for it to perform that service. So this has become the norm really over the years. It's known as send and store. Uh, or providing a flat file. Sometimes you hear it referred to as that. Well, what that results in is a transfer of a lot of data. And once it's outside of, uh, of the control of that company, the protection of that data is only as good as your HR tech vendor's systems.
(00:08:39) - And so what's happened over the years is these credit bureaus have created HR, tech service divisions, and it's a strategic way for them to source and retain records. It's actually another way of data mining. And so they've gone where the data is. They provide a service that saves time and resources for HR departments. But the data is very valuable. If you look at credit bureau financial statements, they make a lot of money on the data broker side of things. And so just focusing in on the area that, uh, vault verify works and mostly is employment and income verification. It's also known as veo or voy. Uh, just to quickly describe that, that's when a, uh, company like a lender is providing a loan to an employee, for example, for a mortgage, they have to verify that that employee is working and what salary they make oftentimes. Right. So that's a VA or Voi. Um, credit bureaus sometimes, uh, operate in that space and provide these services. And uh, within veo voy, I was surprised to find that about 80% of the market share of that business is really done by credit bureaus.
(00:10:01) - And so this is why credit bureaus have branched out into providing those data-heavy HR services. It guarantees their ongoing data supply. And so you look at Equifax, they're said to have 2.8 million contributing employers. I love the term contributing. And they contribute between 150 and 160 million records. That grows about 6 or 7% annually. And their pitches contribute your data to us, and we'll take care of the calls. Right. All of the verifier calls coming in. Um, so that's really one of the ways. But in the air space, there's also a second way that data brokers gain data. And that's because they have contracted to be the service of choice for certain HCM platforms. And so they have a preferred vendor status or paid exclusivity arrangements, um, that impact the free market in a way they and from our perspective they reduce competition. But it also from their point of view brings a steady supply of kind of client growth. Excuse me. So it brings a steady supply of client growth. And you know you think from the HR department's perspective I can't blame them for opting for this approach.
(00:11:21) - It's kind of the status quo. And you know, your your HCM platform rep might say, well use these guys and why wouldn't you. Right. You know 90% of the market has already chosen them. And that many companies can't be wrong. Right. So it's easy to just choose that path. And so so many other people have chosen it. And so when you dig deeper a little bit and you closely examine what's going on, it really represents a huge increase in employee data exposure, right? There's very few people that have access to this data. And as we'll come back to it's really 100% unnecessary. Uh, every HR department has a choice to make. And there are many reasons why sharing all your employee data with a data broker is a really bad idea.
(00:12:16) - Can you tell us a little bit more about some of the consequences of sharing that? Because obviously these organizations that are doing this, you know, they're trying to help the employee out by verifying a lot of times, you know, if someone's buying a house and they're getting a mortgage or, you know, some other activity where they need that employment verification to happen, but, you know, they're putting their trust in these organizations, probably not thinking about it beyond like, I'm just giving them the information that is needed to help this in play.
(00:12:46) - And you're saying not always a good situation when you do that.
(00:12:52) - Yeah, there's a couple reasons for that. I mean, yes, it provides a great service and it's it's a service that Vault Verify provides too. But the the difficult part about it is really that send and store method where you provide access to all of that data, you share it every pay period. That's a lot of data. And there's a lot of privacy involved in that. You're talking about what people earn. Uh, and, and, you know, that's one of the most valuable nuggets of information you can have out there. And it's something that a lot of people want to keep private. But, um, when you when you think about this, um, providing all of that data is unnecessary and I'll get into that a little bit more. So the data is critical for the data broker business model. It can be acquired in many spaces, but once it's in that database. So once that employer provides the data, it's in there.
(00:13:53) - Indefinitely. Really. I mean, they could hold on to it for years. And they do. And they actually the credit bureaus have put together products and they they market the combined strength of multiple data sets. And it includes your employer data. Right. They mix that in with everything else. Uh, Equifax for example, has a service they sell called Total Verify, which is described by them as a data hub that combines all sources, including employment and income information. So you think about that. It's it's sort of like bragging, look how much we know about your target. And because those data sources are combined, it's all about aggregation and segmentation. Any breach can be even more damaging because all that data is put together on an individual. So. I know you might think, well, is there any risk of breach or misuse? Well, you only need to look back to see that this is more than a possibility. It resulted in a massive settlement six years ago, 147 million records.
(00:15:03) - Remember how soon we forget. But it's it's not really about the breaches. It's more about what's what that data is used for. And I.
Speaker 4 (00:15:14) - Think.
(00:15:15) - We're all aware that in the US. Americans want common sense data protection. They don't want to be a part of this network of massive databases. They want to opt into their data being used, not be required to opt-out or jump through hoops. Uh, they have a right to know where their data is being stored, uh, who it's being shared with and how often. And they don't want to be stopped. They want transparency. And so for your company, that employee list with all the compensation data can tell a lot about not just your employees, but also the company. And why would you give that over to someone that's not really protecting your data. And in fact, they might actively be reselling it, so they may be packaging it up to make more money off of it, further monetizing it. And there's a lot of ways this data is being misused if you think of the downstream effects.
(00:16:15) - So once that payroll data is shared each pay period, it's under the contract as an HR tech service vendor, what happens to it. So the way we look at it, we know the the metrics within the employment and income verification space. And so every year, on average, about 20 to 25% of your employees are going to request a verification for some kind of a loan or other activity, someone's buying a car or something like that. So that's 1 in 5, maybe 1 in 4, meaning that in a given year, four out of five of your employees don't need this verification service. But yet the HR tech vendor wants all of that data. What for? Just in case they get a call that's not really necessary. So one data broker in particular, if you look at their metrics, they fulfilled 148 million verification requests in 2022, which is very close to their number of total records. So if you ask yourself how is that possible? That's not a 1 in 4 situation. That's a 1 to 1 ratio.
(00:17:28) - So if it's not legit employee consented verifications for loans or transactions like that, what is being done with all that data. Does it get deleted every pay period or does it get deleted at all? No, it gets repackaged and resold because these companies are in the business of monetizing data, uh, their credit bureaus. Yes, but they're also data brokers. And so the HR tech services provide a supply of data. They're the supply side. They feed the demand for data from other businesses targeting those employees. So their employees are consumers, after all. And the employer sometimes unwittingly or it really is just the lack of awareness. They're providing this data, but they don't always realize what it's being used for.
(00:18:22) - So how is bolt verified different from those other verification services that are out there?
(00:18:28) - Well, we're different in a number of ways, but the key really for us is the vault edge gateway. It's our unique way of creating an API with the HCM platform of our clients. But instead of extracting all of their employee data and storing it on-site with us, what we do is when we get a request from a verifier, we first verify that the employee has consented for that verifier to receive the data in a report.
(00:19:02) - And then we reach into that HCM platform through the API and extract only the data of that employee. We share it with only that verifier. It's a it's a permissible purpose. We've been consented. We've also, uh, checked on the verifier to make sure that they're, they're legit lender or have a reason for the data. And then once we fulfilled that transaction, we blow up the data. Essentially we delete it. We don't need it. And so I think the key difference is because we're in the business of providing verifications and we're not a data broker. We don't need that data. We don't store it. We don't really we don't want the data. Uh, we just want to fulfill the transaction, uh, which the verifier pays us for. And then another unique aspect of our business, because we're utilizing the employer's data, we feel that we should share revenue back with that, uh, employer. And so they get a portion of the fees that we, uh, collect for the transactions for their employee pool.
(00:20:11) - What type of companies are the perfect fit to work with Vault Verify?
(00:20:17) - Well, really? Any company that, um, values data privacy, any company that feels that it's important for them to not expose employee data. And in, in the modern environment, with all of the laws that are changing, compliance is becoming a big issue because HR departments need to protect their employee data. I look at the cpra, the California Privacy Rights Act. It now extends to employee data. And so if you're an employer with employees in California, you have to protect that data. So in a way, I would say that anybody who is an employer of any size, uh, would be interested in these services and, and managing, uh, verifications in the way that I've described, as opposed to the way that's the status quo. Uh, the revenue share is another nice element, but it's really more, more important for them, uh, to protect their data, knowing that in this environment there's, there's, uh, liability for, uh, exposing all of that data.
(00:21:32) - There's there's risk involved. And so it's a way to, uh, reduce your risk with data exposure by working, uh, with a company that, uh, accesses that data in a secure way.
(00:21:46) - Increase what impact has Vault Verify seen with organizations that are working with your company.
(00:21:56) - Well, that's a very good question. Um, one impact is that they can rest assured that the data is only being accessed when needed, and that it's not stored offsite. I think I mentioned it previously that when you when you get to a point where you're taking your data and storing it offsite with another HR tech vendor, uh, you're, you're really only protecting that data to the extent that they are. And if they're sharing that data with other third parties, then you've really lost control of your employee data. And that's a scenario that employers don't want nowadays because they're in California. There are fines involved. And besides all of that, you have as an employer a responsibility to be a good steward of the data that you have.
(00:22:48) - That's private information that your employees may not want to reveal. Uh, so our, our, our clients have, uh, bought into that. They realize that there's a lot of value in that. And then I would say that our, our rev share program, where they receive a financial incentive, uh, that's a that's sort of icing on the cake, but that's not why they make the decision. It obviously to reduces their labor. Uh, they don't have to have someone taking those incoming verification calls. They don't have to prepare the reports. But just about any company can say that. But sometimes what happens is when it's not real-time. This API that I mentioned provides data. That's up to the second. I mean, we pull that data right before we provide the report. And sometimes what happens in the verification world is you have to re-verify. And that means that right before the loan closes you have to double check. Right. Well, these employers who have outsourced to other companies that don't have real-time APIs, the data that those companies are selling might be a week, two weeks or more old.
(00:24:00) - And so to re-verify that that verifier needs to reach back to the employer. And the employer says, wait a minute, I thought I outsourced all this. Why are we getting all these phone calls? Right. So there's a number of compelling reasons, but I think that the main reason is really, uh, data security. That's the bottom line.
(00:24:20) - And what is the future vision for Vault Verify?
(00:24:24) - Well, we're really excited. You know, we've had a really, uh, uh, important year, I think, in the history of the company because we've we've shifted a little bit, you know, um, we've been providing employment and income verification for ten years. We have, uh, hundreds of clients that benefit from that. But we've always sort of positioned ourselves as just a provider of employment and income verification. But what we've done now is we've realized that it's really the API that we have and the stance that we've taken on data security that is, uh, the key value that we provide.
(00:25:05) - And so we have reached out in 2023. We found like-minded partners that can gain efficiency and provide um. I would say less less disruption when they have a client because they don't have to ask for data reports, they don't have to get data because now that partner can get the data through our secure API vault Edge gateway, and we can use that as a conduit to securely provide employee data that's needed for all of these HR services, but provide it in a way that it's not a data grab, provided in a way where you're only extracting the information that you need to perform that transaction, and you're only using that data for transactions that have been consented by the employer and the employee. And so it's much more transparent than some of the other models. We found that the voltage gateway is really where our value lies. And so we're uh, obviously trying to raise awareness of that as a very unique and very different approach. And perhaps one might say the better approach or the more modern approach to managing employee data.
(00:26:27) - Uh, sometimes when I'm talking to someone who's not in this space and I get on the conversation and I say, well, do you realize that your data is bouncing all over the place and that sometimes it's your employer that's packaging all of that up and just giving it to someone, and they may not be aware of everything that other company is doing with that data. But we're all consumers, and we're all very concerned about privacy and the issues that that that can cause in our in our day to day lives. And the US does not have a federal comprehensive data security, uh, law similar to the EU with GDPR. And so what you end up with DNA is this patchwork of state laws. And California's been very progressive about it, but we don't have the protections that perhaps we want as consumers in the US. And so finding a way that proactively protects that data, it's a way to sort of futureproof your organization and make sure that not only that you're compliant now and that you're staying within the law, but that you're in compliance of where the laws are going.
(00:27:49) - You've provided a lot of great information and insights today. What final thoughts do you want to leave our audience with?
(00:27:57) - Well, I think my final thought would be just to encourage HR executives and payroll leaders to ask more questions. Really find out about your data and what are you sharing with HR tech vendors? And listen, I mean, outsourcing makes sense and the services are helpful, but the exchange should be done on your terms, not the data-hungry terms that are dictated by these big players in the marketplace. And so you have to begin to ask your HR tech providers why they need all your data, and not just the data for those employees consenting to provide verification reports. Right? So as a client, you can also ask for your transaction report, right? So if the number of verifications is way above 20% of your workforce, you should be suspicious about that and wonder how that data is being repurposed by that company. Right. And so it's interesting, you know, Deanna, we recently signed a large organization and they were actually still doing verifications in-house in their payroll department.
(00:29:02) - They had, you know, a team of four taking those incoming calls from lenders. And that's that's fairly rare nowadays for a big company. But what's revealing is that when they decided it was time to outsource, the reason they reached out to us specifically is because we were not a big data broker, we were not a credit bureau. And the more they learned about that approach, the more convinced they were of our business model. So there is an informed client, uh, actively seeking out someone who gets it and who understands that protecting that data is important. And so, you know, most companies have outsourced and unfortunately, the big players in our verification space, uh, are all data brokers. And so people are getting savvy about protecting their private data. And that's encouraging.
(00:29:54) - Where can our listeners go to learn more about Vault Verify?
(00:29:58) - Well, of course, you can go to vault verify. Com. Um, we have a lot of resources, including, uh, a video that sort of explains this process.
(00:30:08) - Um, it explains our process, the vault edge gateway, and sort of compares it to what has become the norm out there, unfortunately. And so, um, that's probably the most important place I can point people to is to, uh, what? It's a three-minute video, but if you watch it, you'll get it, you'll understand what's going on. And the most important thing is you'll know that there is a better way, that there's an alternative. And you have a choice. You know the old rush song. If you choose not to decide, you still have made a choice. So if you know now, after watching this podcast or listening to this podcast, that there's a problem out there and that you may be providing data that's being misused and you don't do something about that, that's a conscious decision that you make. And it's really a shame because there are such easy alternatives out there. And, you know, we can talk to you about this and we can get you up and running 2 or 3 weeks after contract with these APIs that we have with all the major HCM platforms.
(00:31:18) - It's a fairly quick hookup, and then you can have the peace of mind that you're doing what you should to protect your employee data, and being really good stewards of that data for your employees.
(00:31:32) - Well, said Reece. It was great to catch up with you today and chat about the latest things happening over at Vault Verify. Thanks for being on this episode.
(00:31:41) - Thank you Deanna. This was a great opportunity. I appreciate it. Thank you very much.
(00:31:46) - My pleasure. For those listening, we will drop links in the comments below. We hope you'll tune in again next time.
(00:31:59) - Thanks for listening to this episode of the HR Tech Spotlight podcast, where we showcase some of the best up and coming HR technology options in the market. If you are an HR tech company leader who would like to be. For a guest spot on this program. Please contact me via GrowthModeMarketing.Com. Or reach out to me Deanna Shimota on LinkedIn. And if you found this show informative, subscribe. Connect with us on social media and leave a review.
(00:32:28) - This is Deanna with GrowthMode Marketing signing off. Thanks for listening. We hope you'll tune in again next time.