04 Oct Three Things They Don’t Tell You About Bank Verification
By Adam DiVeroli
Not all bank verification solutions are the same, they might not even have the same function. If your business is using ACH transactions, odds are you are utilizing some sort of bank verification solution. Verification is a term thrown around casually to describe products that perform various functions, such as to confirm a bank account’s status, affirm balance, authenticate reputation, and to establish ownership. These generalizations focus on the result of verifying, rather than the process.
However, it’s important to consider the different aspects of bank verification to understand what the available methods are and how they work, ensuring that you are using the correct tool for your needs. Here are three factors to keep in mind when selecting a solution to fit business’ needs.
- Credentialed or non-credentialed?
- Credentialed Verification: A credentialed log-in process requires consumers to provide their internet banking credentials (username and password). This method provides a plethora of information including the current balance, transaction information, verification of ownership, income verification, and more.
- Non-Credentialed Verification: The other way to obtain bank account verification data is through a non-credentialed method. For this method, consumers do not need to provide their online banking credentials. This method provides information including the current balance, verification of ownership, and more. The benefit of not requiring a consumer to provide their internet credentials is that there is zero friction added to your application process.
- What type of data do you need? Funds availability, name listed on the account, routing and account number, status, or the characteristics and reputation of the account?
- Funds/Balance Verification provides insight into the availability of funds in the borrower’s bank account. This data can be used to determine if the borrower has enough funds to clear an ACH payment, or to obtain the current balance.
- Bank Account Status Verification provides insight into the overall risk level of the account and whether or not a payment will successfully clear. Status can also provide characteristics and reputational data, which is potentially an indication that there are multiple negative transactions associated to the account.
- Bank Account Ownership Verification helps you determine if the applicant owns the bank account that they have provided on the application. Credentialed solutions can provide the full name, routing, and account number associated to bank that is connected. A non-credentialed solution will provide a score giving insight into the likelihood that the bank account provided is owned by the applicant.
- What is the coverage of financial institutions?
The biggest downside to a non-credentialed solution is some of the data sources available may provide less coverage than others and the credentialed solutions. The average coverage for a non-credentialed solution is roughly 60%, whereas a credentialed solution provides 90%+ coverage. When determining coverage, it is important to not only understand how many financial institutions are covered, but what the coverage is of your consumer base. For example, if 30% of your customers have an account with a bank, it is crucial that you find a solution that has coverage with that bank.
From our experience, there is no one product or service that will provide complete coverage on both data and banks. Rather, we recommend a comprehensive approach, combining both credentialed and non-credentialed verification services, to provide the best response time, coverage and opt-in rates. Merchant Boost’s suite of bank account verification services is a comprehensive, tiered solution that delivers actionable insights on the bank account used by your consumers.
- The first layer is made up of our innovative non-credentialed suite, Bank Account Verification, that can be combined and configured according to the financial service provider’s needs of verifying ownership, balance, status, or funds availability.
- The next layer is a suite of a credentialed bank account verification services including Bank Connect and Bank Boost:
- Bank Connect, is a solution designed specifically to automate the bank account ownership verification process. Bank Connect returns the full account number, routing number, name of account holder, and account holders address in just seconds.
- Bank Boost provides deep insights into income, employment, expenses, and the overall ability of a customer to repay by creating a digital profile of their financial situation.
- Bank Boost Scores provides two easy to use credit risk scores, as well as data to verify identity, income source, income amount, income frequency, loan stacking, expense trends, and ability to repay.
- The final layer includes Bank Boost’s automated account monitoring that alerts when borrower funds are available, and the Payback Predictor algorithm determines the optimal date for processing payment.
So, while you may be using a bank verification solution, you need to evaluate if it is meeting all your business’s needs. To most effectively implement any bank account verification process, it’s critical to incorporate both credentialed and non-credentialed products in a layered approach. The right bank verification solution has an expansive coverage, improves the user experience, and gives you the data you need to accomplish your goals quickly and seamlessly. While the most basic bank account verification tools confirm a bank account simply exists, superior solutions ensure that the account is valid, owned by the subscriber, confirms that there are funds available in that account, and enables you to collect from that account at the right time.