Are you aware of Bank Account Verification?

Probably not as a title, but we have all come across it whenever we make an online payment and are asked for the counterparties account details and they are checked, and you receive a positive or negative result.  I see it every time I make a payment with my Santander, HSBC, and Starling Bank Accounts.

Bank Account Verification (BAV) is helping reduce fraud by ensuring the account really belongs to the person named.

It has now a necessary part of the Automated Clearing House (ACH) transaction process (i.e., UK BACS) that ensures funds are coming from and going to legitimate bank accounts. Also known as “funding source verification” the service confirms that the account to where the funds are destined is a valid bank account.

Make the link between your customers and their bank account details

Customers want to pay the beneficiary or supplier according to the commercial transaction concerned, and the supplier wants to receive the payment due with the minimum of fuss. To do this, assurance is required that the correct bank account details of the suppliers are in the hands of the paying customer, for the transaction to reach the beneficiary’s account error free. Incorrect bank account data can lead to payments failing and potential fraud. BAV ensures that the account details provided are correct, and that the account belongs to the correct beneficiary, thereby reducing the possibility of fraud, risk of error, and payment delay.

Who is it for?

Organisations that initiate payments or direct debits to or from individuals or businesses.

The key features of the service are:

  • Reduction in errors regarding transaction payment details to ensure the best possible experience for customers
  • Ensures the customer (payer) understands the account ownership regarding the beneficiary, so payments are made to the correct beneficiary account
  • Supports a secure environment for making payments to individuals and businesses

Mitigating Automated Clearing House Risk

For a typical ACH payments infrastructure, BAV helps mitigate the risks of ACH returns and potential fraudsters. “Unauthorized Returns” as they are known, occur when the originating bank or “initiating bank” – that is the buyer’s bank – requests that the original sum debited from the buyer’s bank account to be returned and re-credited back to that same account (i.e., from where the initial funds were supposedly coming). These actions can come with a significant financial and commercial impact for a business when experiencing returned payments; which is why having a reliable BAV system is an important factor to keeping a low ACH “return rate”. There can also be a cost to the initiating party in such circumstances, due to “return fees” levied by the initiating bank on the ordering party/payer (its customer). Consequently, having a high number of returned transactions can come with financial penalties, and furthermore may lead to losing access to the relevant ACH network.

A good current example of the utilisation of BAV by an ACH, is in the UK Faster Payments domestic infrastructure.

BAV is usually developed by a 3rd party and offered to the banks as an API. 

Who is the leader in BAV APIs?

One of our partners is a major supplier of BAV, and they have agreed connections with over 150 banks globally.  There BAV API is a state-of-the-art tool.  It comes from a stable of products to help banks and finance companies have information on which they can conduct their business.

They have an App that would allow a car salesman to immediately check whether the prospective customer can afford the car they are interested in or steer them in the direction of a car they could afford.

The use of BAV is still in its early stages, and it remains to be seen how the individual domestic infrastructures progress with the service. Given the potential New Payment Infrastructure supposedly coming to the UK market over the next few years, it will be interesting to see how the BAV service is rolled out, and what the ultimate key features and benefits will be; as some FinTech and software concerns already offer BAV applications which encompass different aspects of the service.

Commercial entities can use a BAV application and service as an internal tool embedded within their own payments and CRM systems, and enjoy all the benefits. This is in addition to banks and payment infrastructures using the service as an integral part of their network for the transmission of the actual transactions themselves.

Our partner is looking for local partners to sell and support the BAV API – could that be you!

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