Bank account verification is a crucial part of all types of money transfers. Most banks have to verify customer bank accounts before allowing payment to go through. ACH transaction process that ensures funds are coming from and going out to legit bank accounts. It’s also known as the funding source verification, or sometimes payment verification. But in reality, it’s the bank account that is being verified.
As more and more businesses are offering online P2P payment services, they need to verify bank accounts before allowing customers to use their services. The biggest example of this is PayPal, they use an outdated method known as Micro-Deposit bank verification. Having a reliable bank verification method makes sure that the customers have a pleasant experience. Customers on either side of payment services need to have a pleasant and sage experience, and to make that happen, bank account verification is needed.
Verifying a bank account can help in reducing the risks of payment returns and reduce potential fraud. Unauthorized returns occur when the originating financial institution (ODFI) requests the amount debited from the bank account to be returned to the account to which it was withdrawn. These actions can come with financial impacts for a business experiencing returned payments. This is why having reliable bank account verification methods is crucial for businesses of all kinds.
To provide your customers with a secure, seamless, and pleasant payment experience, businesses need to verify bank accounts before onboarding customers.
Reliable Bank Account Verification Methods
Before verifying any transaction, verification of each funding source is essential. Whatever bank account verification method businesses choose, it should be reliable enough to provide accurate information every single time.
Here are the most common bank account verification methods:
1. Micro-Deposit Bank Verification
Micro-deposit verification is the most common type of bank account verification. PayPal is the most common business that uses micro deposit bank verification. To verify if a account is valid, one financial institution sends less than ten cents to the one. If the bank doesn’t offer online banking, or the user can’t verify and can’t remember the credentials, micro-deposit verification can fail.
When using the micro deposit verification method, the user will have to input their bank account and routing information. The two small credits that go into a customer’s account are available into the account in 1-2 business days. Then the customers have to manually input these numbers to verify the verification, which is the last step in customer onboarding.
2. Attaching Unverified Funding Sources
Businesses that need to send funds generally avoid sending the user to a third party for account verification. This can be catastrophic for businesses as the users have to provide their account details and routing information to unverified sources.
You should always choose a verification provider that you can trust, even if it is a third-party verification service.
3. Third-party Bank Account Verification Service
A check verification service or third-party bank verification service offers businesses, individuals, and other financial institutions the ability to check the authenticity of the account. Third-party bank account verification services often provide seamlessness, and smoothness to the bank verification plan.
Third-party bank account verification can be done using multiple methods such as checking different databases with negative account histories. They also allow businesses to verify the negative history, checking the routing and account number, and its validity. The best way to verify customer accounts is by confirming the information.
4. Bank Statement Verification
Bank statement verification provides a clear picture of bank accounts. Businesses, individuals, and others can use this to instantly verify bank accounts. Bank statement verification technology can help users verify bank account documents that can assist banks and FinTechs in verifying bank accounts and eliminate the risk of fraud and scams.
All types of bank account document verification can be done in seconds with bank verification technology. Bank verification solution providers like DIRO offer instant bank account verification by using bank account documents. Even the best bank account verification methods tend to fail in verifying fabricated bank documents and stolen documents.
Onboarding New Clients
While account verification plays a major role with all of your customers, it’s arguably one of the most important when it comes to new customers. Your customer onboarding process involves determining the safety and reliability of doing future business with this client.
If you’re not careful, you may run into some challenges with fraudsters. Other times, you may encounter problems with incorrect customer information. These scenarios make it harder to discover problems and can make it tougher to onboard new customers.