Bank Account Number Verification for seamless onboarding and fraud mitigation

Bank Account Number Verification

Published on 2 AUGUST 2022 | 3 mins read
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Approximately 7400 fraud bank cases were reported by the Reserve Bank of India in the financial year 2021, totalling 1.4 trillion rupees. Bank Account Number Verification reduces fraud by identifying legitimate accounts and uncovering illicit accounts that do not belong to the user, have been frozen for illegal activity, or have been dormant for a prolonged period of time.


As a result of global social-distancing rules and lockdowns, face-to-face interaction and subsequent authentication and validation are uncertain in this unprecedented COVID period. Through Bank Account Number Verification API, with the customer's consent, a penny is deposited into an employee's account, and the accountholder's name is received based on their bank records before payment or salary is made, without requiring any manual intervention.


This is just a glimpse of the importance of Bank Account Number Verification. In these times of crisis, let's understand this powerful tool for onboarding and fraud mitigation.


What is Bank Account Number Verification?


Bank Account Number Verification is a critical part of the due diligence process. Checking bank accounts ensures that they are legitimate sources of funding. 


Bank Account Number Verification is the primary process for confirming a bank account's validity and authenticity. Financial products requiring client verification, such as loans, or engaging with organizations or simply opening an account, such as with cryptocurrency exchanges and buy now pay later platforms, require account verification.


Managing financial institutions and banks involves constant inflows and outflows of funds. The bank account serves as a platform for transferring and storing funds, so it is essential that the account is identified and validated. 


Features of the Bank Account Verification Solution


Bank Account Number Verification API by Karza covers all banks operating under the Payment network services provided by NPCI. Multiple banking partners have been tapped to address any unforeseen server downtime issues subject to NPCI's source availability.


The average latency period is less than 2 seconds from the time the Bank Account Number Verification API has been called to the time the account holder's name is returned as output, it takes only 2 seconds!


A cap is placed on the number of transactions that can be handled by the Bank Account Number Verification API. A beneficiary account may make up to eight successful API transactions and two unsuccessful API transactions in a 24-hour period. This feature has been incorporated into the API to prevent misuse by miscreants who credit their accounts inordinately many times. 


A user's account can be blocked or closed at their discretion or by a government agency due to suspected fraudulent activity. In this case, Re 1 will not be credited to the account, even if it is an NRE or NRO account, and the response will clearly indicate the nature of the account.


Karza Bank Account Verification Advanced


The "Bank Account Verification Advanced" requires IFSC code, Account Number and Account holder's name to be filled in with commensurate values.


Similarly, Re 1 would be credited to the customer's account, and the account number, IFSC code, and account holder name would be validated and authenticated based on the extensive response received from the NPCI. 


Matching scores are calculated based on the match between the entered name and the response. Name match scores, which are expressed in percentages, are used to validate and authenticate account holders' names. In order to qualify as valid, the name match score must meet a minimum threshold. If it does not meet that threshold, the account will be considered invalid, which will prompt the authorities to investigate further for any signs of fraud. 


Moreover, the extra layer of authentication ensures that the account does not become invalid as a result of unintentional changes to the user's name. Even if the account holder's name is Yash Shah, but it was created under the name of Yash S, the account will still be declared valid and belonging to the same individual, despite the name match score in such circumstances not being 100%, but still very close, providing sufficient credibility.


Use cases for Bank Account Verification


Following are the use cases for Bank Account Verification.


Customer Acquisition 


During loan acquisition, the bank account needs to be validated for loan disbursement. Before the lending bank can proceed with disbursement, the bank account must be validated. 


Before the lending bank can set up the automated clearing house payment (ACH) system, which facilitates the electronic transfer of funds from the bank to the borrower's account, they must validate the borrower's bank account. If it's a valid account, it can initiate the ACH payment or any other necessary payment. If it's not a valid account, the journey will end there. 



NPCI allows you to set up NACH payments for recurring bills, such as mobile bills, electricity bills, and subscription fees, which would automatically debit the customer's account and credit the company's account without any hassles or manual intervention. Before setting up and implementing NACH payments, penny drop verification is used to verify the customer's account.



Merchant Onboarding 


Multiple NBFCs and payment systems offer POS-point of sale as part of their merchant onboarding services. Point of sale systems are where the customer pays for goods and services, is directed to the checkout page, and is expected to pay using a specific payment method offered by the payment company. 


Payment companies will be required to validate the bank account of the customer in such cases in order to settle pending payments. This is where Bank Account Number Verification API comes into play. As a result, Bank Account Number Verification is mainly used for onboarding merchants, distributors, or mere customers.



Applicant’s details


A company can also verify an applicant's details that have been provided on some sort of form that includes the bank account name and account number. Using the Bank Account Verification API, it can retrieve the account holder's name and match those two details.



Fraud Mitigation


Fraud can be mitigated by verifying bank accounts accurately. For example, fraud caused by customers accepting funds from illicit accounts might be handled by you. A bank account verification can stop such acts at the source if NPCI or any applicable governmental body detects suspicious accounts or if an account has been frozen for illegitimate use of funds.



Employee Account Verification


Prior to disbursement of salary and other incentives, employees' bank accounts must be validated and authenticated. This verification aims to ensure that the salary is paid to the right employee. 


Following the acquisition of the employee's bank information, the IFSC code and account number can be entered into the system, and the employee's name can be matched against the employee's name in the bank's records. Verifying the employee's bank account is an integral part of the onboarding process since it confirms and validates the information provided by the employee.

   


The Bank Account Number Verification is an essential part of any due diligence as the bank serves as the repository for funds flowing in and out that constitute the very basis for any transaction. As a result of Karza Technologies, Bank Account Number Verification which traditionally took weeks can be accomplished in mere seconds with its penny drop verification.


To know more about Karza’s Bank Account Number Verification APIs write to us at connect@karza.in or call us at +91 9819802177