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man
ZOOP Team
06 August 2023
4 min read
Digital Onboarding
What is Bank Account Verification? The Methods Used for Bank Account Verification

Bank account verification is a procedure via which businesses cross-check the owner of the bank account. This is a part of the customer due diligence procedure, it is required to prevent ID fraud and financial crimes. Bank account verification is an ideal way to reduce documentation errors and streamline KYC data management. With the advancement of technology, there are numerous procedures that can be taken up in order to identify the authenticity of the bank account owner. Some of the most preferred ways of bank account verification are bank account verification API, penny drop verification, and third-party verification methods. With the growing trend of online banking and financial institution, bank account verification is a must for all financial institutions and banks.

How Can Financial Institutions Perform Bank Account Verification?

Though there are numerous ways of doing bank account verification, the below listed are the most preferred and versatile approaches that can be easily fixed into the framework of any bank.

Penny Drop Verification

Penny Drop Verification is one of the most legitimate methods for a user’s bank account verification. It is carried out by depositing INR 1 in the account. As soon as the amount is credited, the verified bank information and the beneficiary’s name are shared.

Bank Account Verification API

The businesses can opt for APIs as per their preference. These APIs help in identifying and authenticating consumer account owners. Businesses and financial institutions can check the status of the bank account holder instantly.

Verification via Third-party Bank

A verification service or a third-party bank verification service can also be considered for knowing the validity of the bank account. Though, it isn’t considered secure for bank account verification.

Penny Drop Verification

Penny drop is advantageous in several ways, it ensures the legitimacy of the user’s bank account and determines whether the specified bank account is active or not.

The process of penny drop verification is stated below:

  1. The bank account number and IFSC code of the customer are provided to the penny drop service provider.
  2. To access the penny drop function, the service provider’s dashboard or the penny drop API are used.
  3. INR 1 (a penny) is credited into the customer’s bank account.
  4. The process is successful if the customer’s bank account is active otherwise it fails
  5. In case of a successful transaction, the beneficiary’s name and verified account status are returned to confirm the consumer. In case of failure, the account status and the reason for failure are returned.

Penny drop check can trigger a number of transactions, such as requests for partial withdrawals, including transfers of insurance funds, pension fund transfers, transfers of employee salaries, etc.

Bank Account Verification API

The Bank Account Verification API is considered to be a simple and reliable way to verify a bank account’s authenticity. It is helpful in controlling fraudulent activities. Most regulatory organizations recommend using online bank account verification API services, for specific institutions and entities. The only requirements to begin with this procedure are the customer’s selective credentials.

The process of Bank Account Verification API is stated below:

  1. Add the IFSC code and the customer’s bank account number.
  2. The details are received by the banking information system to verify the same
  3. Immediately verified bank accounts are available for transactions.

Bank account verification API, is a great way of disbursing loans instantly. Also, it helps in identifying fraudulent accounts and removing manual errors when payouts are made to verified accounts. In the gaming industry, the amount payout process can be fastened with the help of verifying the player’s bank account.

Third-Party Bank Verification Methods

A check verification service or a third-party bank verification service can be used to verify a bank account.

There are a lot of ways to verify a third-party bank account, such as analysing whether the account number is real, searching databases for accounts with a poor track record, or calling the bank directly to get the information confirmed.

Third-Party Validation (TPV) of bank accounts is needed for businesses in the BFSI (Banking, Financial Services, and Insurance) sector dealing with Securities, Broking, and Mutual Funds. As per the Securities and Exchange Board of India (SEBI) regulations, consumers can conduct transactions only from bank accounts they provided while registering.

How To Use Bank Account Verification?

Bank account verification APIs are indeed the ideal and flexible tools to verify customer accounts.

  • Step 1: Integrate with bank account verification APIs
  • Step 2: Customer enters bank account number & IFSC Code
  • Step 3: The API extracts pre-validated data for verification. The response data include – Client ID, Client’s full name, UPI ID, and IFSC details
  • Step 4: The response data is secured & stored on servers. The banks can then utilize it diligently.

The customer details required to verify the customer’s identity are easily extracted from bank account verification APIs. extracts key customer details that are important for banks to adequately verify customer identity and make sure their bank account is legitimate. The entire documentation process can be streamlined with the help of bank account verification APIs. For e.g., data be used to auto-fill information in bank applications.

Why Is Bank Account Verification Crucial For Onboarding?

In any sort of monetary transaction, the business or the financial institution involved require details of the customer’s bank account. To minimize the cases of identity theft, and money laundering and create a healthy system of money flow, bank account verification is a must. Let us know why bank account verification is important

  • Bank account verification: Fraud Prevention

Bank account verification is an integral part of registration & KYC. It verifies the client’s authenticity. Businesses can use BAV to analyse whether the submitted bank account information is accurate and belongs to the person who claims so.

  • Bank account verification: Simpler than normal KYC

Bank account verification is simpler and advantageous to perform. The only requirement is the customer’s bank account information. The data required is handy, making bank account verification quick and convenient for banks and NBFCs. To support the instance, bank account verification is quick as it involves the usage of APIs.

  • Bank account verification: User-friendly

Bank account verification workflows can be integrated as APIs. APIs undoubtedly are easy and quick and hence the customer verification process can be introduced with ease into any key touch points.

ZOOPSTACK’s New Approach to Bank Account Verification

ZOOPSTACK has been helping businesses save onboarding costs, decrease KYC drop-offs, and smoothen customer onboarding journeys. To enhance the process of bank account verification, apart from penny drop, the Zoop Stack comes with another unique BAV API that doesn’t require dropping credit in the bank account of the user.

Want to try? Contact us at : sales@zoop.one

APIs
Bank account verification
Financial Institution
Identity Verification
Penny Drop Verification
man
ZOOP Team
06 August 2023
4 min read
Digital Onboarding
Creating and Customising Verification Solutions for All
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