Whether you are a business processing payments or an individual starting transactions, ensuring the authenticity of bank account information is important for reducing risks and preventing errors. This is where bank account verification comes in.
Understanding Bank Account Verification
Bank account verification, also known as bank account validation or confirmation, is the process of methodically validating the accuracy of information provided by an individual or entity prior to executing any financial transactions.
The verification procedure begins by cross-referencing the information provided, such as the account holder’s name and account number, with the data kept by the relevant financial institution.
This steps ensures that the information matches the bank’s records, validating the account’s legality and the accuracy of the submitted information.
Furthermore, bank account verification may include confirming additional essential information, such as the account type and related banking enquiries.
Why?
To improve the transaction’s security and trustworthiness.
Businesses and individuals can protect their financial interests by confirming bank account information prior to conducting transactions.
Why Is Bank Account Verification Important?
Bank account verification reduces the risk of fraud by verifying the identification of the account holder before allowing payments to be transferred.
According to the Department of Justice, one in every five persons has had their identity stolen at least once in their lives, resulting in millions of compromised identities floating around the internet.
When combined with the possibility of account takeovers and synthetic identities, executing financial transactions in this environment puts companies at risk of fraud.
Bank account verification also safeguards the overall financial system by preventing illegal activities like money laundering and terrorism financing.
It can enhance the customer identification program (CIP) as mentioned in the USA PATRIOT Act, which requires US financial institutions to create a program for validating their clients’ identities. Not just this, it is also an important part of adhering to anti-money laundering rules and Know Your Customer (KYC) guidelines.
Establishing an account’s validity helps to avoid fraudulent transactions and deter illegal dealings.
Accurate account verification protects financial institutions and businesses from financial irregularities, which can have serious consequences.
Facilitating automated and digital payments
Verification guarantees that account information is correct, allowing for faster processing of activities like –
- direct debits,
- automatic bill payments, and
- online purchases.
Faulty information can cause transaction failures, costs, and disruptions in financial operations for both consumers and companies.
Maintaining regulatory compliance- Certain verification measures are required of financial institutions under regulatory frameworks such as the Bank Secrecy Act in the United States.
Failure to comply can result in significant fines and reputational harm for the offending organisation. Verification is a built-in mechanism that helps to meet these regulatory standards and is required for legal compliance.
Increasing data accuracy- Businesses and financial institutions acquire large amounts of data for analysis, decision-making, and service development. Verification improves the accuracy of this data, making it more useful for future corporate decisions and customer interactions.
Maintaining account holder relationships- Verification reassures account holders that safeguards are in place to authenticate the validity of transactions and protect them from potential financial losses.
Signzy’s fraud protection strategy incorporates machine learning technologies and additional verification to assist distinguish between legitimate customers and malicious customers.
Signzy’s Bank Account Verification API
Complete bank coverage- Signzy’s tool verifies beneficiary account ownership details and account holder names.
Ensures no API errors- Helps maintain complete transaction visibility with real-time account status information such as active, inactive, frozen, or closed.
Name Match Score- Eliminates fraudulent accounts during bank account verification using a patented name match score to ensure secure onboarding or payouts.
