Instant Bank Account Verification, which will be shortened to “IVB”, has accelerated traditional verification processes. The speed gains have gone from around 1-3 business days for verification to a measly 5-10 seconds.
So, what does this mean? The main benefit is that onboarding and transaction processing is much faster, and these are historically big pain points for customers who are fed up with long applications for financial products. Of course, the main beneficiary are the businesses, who can reduce fraud and hit KYC compliance much faster.
The efficiency of an instant bank account verification service extends to cost savings in the end. Where traditional micro-deposit verification can cost around $1 per attempt with a high 49% drop-off rate, IBV slashes this down to around $0.60 per verification and significantly lowers abandonment rates to as low as 1%. The automation also reduces the need for manual checks.
Enhanced Security and Fraud Prevention
Security is everything to financial companies. It’s always a concern in financial transactions and IBV tackles this head-on by keeping secure, encrypted connections alongside tokenized credentials to directly access bank data. This keeps the risk of data breaches and fraud down as it instantly validates details, so the account’s accuracy and its rightful owner can quickly be confirmed. The impact of this is having fewer account takeovers and unauthorized transactions, reducing chargebacks and fraud more generally. Some platforms like TrueLayer even use Strong Customer Authentication (SCA) through biometric methods.
Improved Customer Experience
Security is important, but it’s rarely felt by the customer. There is a convenience factor though to instant verification, because it makes a world of difference to user experience. By cutting down on the cumbersome multi-day waits associated with micro-deposits, IBV boosts conversion rates and reduces cart abandonment. Industry research found a potential 20% reduction in cart abandonment when offering preferred payment methods like “pay by bank”, so it is important to customers.
Global Scalability
IBV solutions are wildly scalable – they have impressive cross-border capabilities, meaning they can allow businesses to expand their services internationally without the complexities of building local banking integrations. DIRO, for example, has support for 44,000 banks across 195 countries, and it is this global reach that allows fintechs to tap into new markets seamlessly.
Key Companies Advancing IBV Technology
Prometeo specializes in providing Latin American open banking solutions for account validation and payments – this is directly associated with the previous study about cutting cart abandonments down by 20%. Prometeo recently launched its Bank Account Validation (BAV) offering in the U.S. market, enabling Latin American businesses to connect with U.S. banks via a single API – and this API has strong documentation.
Merge is another option which has a unified API for over 200 financial integrations, making FCRA compliance for data aggregation more simple. The focus here, like Prometeo, is on simplifying the complexities of dealing with numerous bank interfaces.
Stripe Connect provides payment gateway services with embedded IBV. This supports global ACH transactions and Strong Customer Authentication (SCA). Stripe’s offering is fairly expensive, but it tightly integrates with its e-commerce platform which is comprehensive. They help streamline the process of collecting bank accounts and optimizing ACH Direct Debit payments.
Fintoc is all about bank payment APIs within Latin America, where they offer QR code and link-based transfers. Their solution caters specifically to the needs of real-time transfers in emerging markets, somewhat aligning with Prometeo’s regional expertise but with a distinct emphasis on payment facilitation.
Finally, DIRO has its own patented document verification with a global reach. It provides machine-readable JSON outputs, and their solution can verify bank accounts almost instantly and with clear proof of authentication.
Strategic Implementation Considerations
To really maximize the benefits of Instant IBV, businesses ought to take place high importance on implementation and integration.
Regulatory Compliance
Businesses must ensure that their chosen IBV solutions adhere to all relevant regulations, which includes GDPR, PCI DSS and any regional open banking standards. Compliance is not a burden, but a guardrail on protecting user data. It’s a a hedge against the legal and financial repercussions of fraud and data breaches, which can end a brand’s reputation.
API Flexibility
Vendor lock-in can be a big challenge. To avoid this, businesses should prioritize IBV providers that offer modular integration options. For example, a verification API that provides flexibility and allows businesses to select and integrate specific functionalities without being tied to a single vendor’s entire suite of services.
Cost Structures
While IBV generally reduces per-transaction costs, it’s important to analyze the pricing models offered. Volume-based pricing may be more suitable for high-throughput use cases such as payroll or subscription services, and businesses should also consider the potential cost savings from reduced fraud and improved customer retention when assessing their overall ROI of IBV.
By integrating IBV thoughtfully, it’s estimated that companies can eliminate almost $18,000 in monthly losses per 50,000 users compared to traditional micro-deposit methods. This approach ensures the business remains adaptable too, because fraud tactics are always changing shape.
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