With ACH or Automated Clearing House payments becoming more and more popular, there are several strategies that businesses can use to collect and verify bank account details. There are several methods available, and ultimately, it’s down to each company to decide how they want to approach the verification process. Many of the different account verification options can be done either independently or alongside one another.
Ways to Collect Bank Account Details
For setting up ACH payments, there are several options for collecting bank account details. Manual account collection is the most popular – simply ask your customer for their bank account information. You can also use voided checks to collect bank account details as these will contain all the information necessary to set up an ACH payment. However, once you have collected the bank account information, you will need to verify that you have the right details, and the bank account does belong to the person or company that you are sending or receiving money from.
Prenotification
Also known as a prenote, this refers to an ACH payment of $0 that is used to validate the bank account and routing details before any transactions of greater value are made. Prenotes can take up to three working days for the validation process to be completed. After this, more payments can be sent. In the event of the prenotification being successful, a notification of change (NOC) or return will be sent. This should be resolved before sending any subsequent payments.
Microdeposits
Microdeposits are one of the most common ways for companies and financial institutions to verify bank account ownership. To do this, the company should already be in possession of the bank account information. They will they deposit small amounts of money, usually a couple of cents or so, to the bank account that they want to verify. They will then ask the customer to verify the amounts that were deposited into their bank. The most common way to do this is by sending two separate transactions. Sending different amounts is important, as otherwise, the bank may flag the duplicate small transactions as suspicious. While this is the most common approach to bank verification, there are some downsides. Mainly, that it can take a few days for the bank verification process to be complete.
Instant Verification
Instant verification is a newer and more efficient method of verifying an account for ACH payments. With this method, there is a direct link to the bank for the purpose of both confirming the account ownership and collecting the bank details. One of the major benefits of this approach is that it can be done instantly, and there is a much lower risk of fraud in comparison with other options. However, the one drawback is that using instant verification means that customers are required to allow the verifier access to their online banking, which some people might be reluctant to do.
Verifying bank information is key when it comes to combatting fraud.
