In recent years, we’ve seen fraud and scams become more sophisticated, but so have the countermeasures - making a dynamic landscape for financial institutions (FIs) to navigate. FIs are ramping up their anti-fraud measures while continuing to offer convenient banking experiences, but can they balance both?
Experts from Early Warning® and Nacha recently teamed up to co-host a webinar exploring how banks can balance consumers’ expectations for frictionless online banking with their need to guard against losses due to bad actors and fraudulent or high-risk transactions.
Our speakers weigh in on the importance of validating the account as a valid, open account, which has become a requirement for those using ACH (Automated Clearing House) debits under the Nacha Supplementing Fraud Detection Standards for WEB Debit Rule. They also discuss how a refined bank account validation approach helps FIs verify the account owner, reduce losses from fraud, enhance the customer experience, and increase new account growth.
What is bank account validation and why is it important?
Bank account validation is the process of verifying the accuracy of bank account details before allowing a transaction to take place. It has become increasingly essential as FIs continue to move towards a more secure and streamlined approach to opening new accounts. It’s also part of Nacha’s account validation rule, which requires FIs to validate first-use consumer account numbers when originating consumer debit payments authorized or initiated over an online channel.
How does bank account validation work?
There are several commonly used methods for account validation:
- Prenotification entry: a prenotification is a zero-dollar test used to validate an employee’s bank account information before setting up a direct deposit transfer to pay them.
- Micro-entry: a credit or debit for less than $1.00 used to verify a receiver’s account or an individual's access to an account.
- Vendor-enabled systems like data consortiums: bank-contributed data is used to verify account ownership.
While these account validation methods are acceptable under Nacha rules, prenotification entries and micro-entries take time to confirm and only validate account access, not ownership. Using a vendor-enabled system backed by consortium data allows FIs to validate account ownership in real time, enhancing the customer experience.
3 powerful results a refined bank account validation approach will deliver:
Banks and credit unions must balance customers' expectations for seamless omni-channel banking experiences with the need to protect against fraud. FIs that implement an account validation approach using solutions powered by bank-contributed data can minimize losses from fraud, upgrade their customer experience, and confidently grow their new accounts.
Reduce losses from fraud through more accurate account validation
A refined bank account validation approach helps FIs identify fraudsters before they can enter the system, minimizing the losses they incur. Using data contributed by thousands of FIs, Early Warning’s National Shared DatabaseSM resource helps provide more accurate account validation information to banks in real-time (as opposed to other validation methods like micro-deposits).
Enhance the customer experience by delivering validation results in real-time
Implementing a solution like Early Warning’s Real-time Deposit Chek® Service allows banks and credit unions to seamlessly validate a customer’s account ownership and make informed decisions on expediting funds availability.
Grow new accounts by making the process more efficient and convenient
By minimizing any friction in the new account opening process, FIs can reduce abandonment rates and confidently open more new accounts. Banks and credit unions that offer a seamless new account opening process without sacrificing security in the process increase trust with potential new customers.
Minimizing losses from fraud and enhancing the customer experience also helps FIs increase brand reputation and strengthen customer loyalty, which ultimately helps them book more new accounts.
Watch the webinar to learn more about the benefits of implementing a refined bank account validation approach and to see a real-world example of how it works.