Three Things They Don’t Tell You About Bank Verification

If your business engages in ACH transactions, it’s likely you’ve implemented some form of bank verification solution. However, not all bank verification services are created equal, and they may serve different functions. The term “verification” is often loosely used to describe products confirming various aspects of a bank account. This can include checking account status, balance affirmation, reputation authentication, and ownership establishment. These generalizations usually focus on the outcomes rather than the underlying processes. 

To better understand available methods and ensure the right tool for your needs, it’s essential to consider different aspects of bank verification.  Here are three questions or key factors to keep in mind when selecting a solution that fits your business requirements: 

1. What’s the difference between credentialed and non-credentialed? 

There are two methods to think about when validating a bank account:

• 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 method of obtaining bank account verification data doesn’t require consumers 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. 

2. What type of data do you need? 

When evaluating a bank verification solution, consider the following data elements:

• Funds/Balance: 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: Bank account status evaluates the overall risk associated with an account. By providing characteristics and reputational data, it can reveal whether there are multiple negative transactions linked to the account and predict the likelihood of a successful payment or return.

• Bank Account Ownership: 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.

3. What is the coverage of financial institutions?

When determining coverage, understand not only how many financial institutions are covered but also the coverage of your consumer base. For example, if 30% of your customers have an account with a particular bank, you must find a solution that covers that bank.

The main downside to a non-credentialed solution is that some data sources may offer less coverage compared to credentialed solutions. On average, non-credentialed solutions provide about 60% coverage, while credentialed solutions offer over 90% coverage.

To effectively meet your business needs, evaluate whether your current bank verification solution includes both credentialed and non-credentialed products in a layered approach. Basic bank account verification tools confirm that a bank account simply exists, but leading solutions go beyond verification. They ensure the account is valid, owned by the subscriber, confirm that funds are available, and enable you to collect from the account at the right time.

Optimizing Bank Verification: A Comprehensive Approach

Combining credentialed and non-credentialed bank verification services, ensures the best response time, coverage, and opt-in rates. As a Nacha preferred provider, ValidiFI’s suite of bank account verification services offer a tiered approach, combining both methods for actionable insights. 

• Non-Credentialed Solutions: Configurable for verifying ownership, balance, status, or funds availability. 
• Credentialed Solutions: Providing insights into income, employment, expenses, and credit risk scores. 

To learn more about our bank account validation solutions, visit validifi.com or contact us to perform a complimentary data study to see the results for yourself.