What Is Bank Account Verification and Why Do You Need It?

ByJulija A.
April 11, 2022

Bank account verification is a process that enables businesses and financial institutions to verify ownership of bank accounts. This is done to minimize risk and meet regulatory requirements. There are several different ways to verify your bank account, and each method has its own benefits. 

In this guide, we’ll cover the different bank account verification methods, as well as how to choose the most accommodating one for your needs. We’ll also provide crucial tips on how to identify red flags during the verification process.

Who Does This Type of Verification?

Many organizations, including credit reporting agencies and government institutions, conduct bank verifications on a regular basis.

When it comes to businesses, this process is typically required to comply with anti-money laundering and know your customer regulations as well as other legal components. There are many different types of businesses that verify bank accounts:

eCommerce stores: If you want to sell products online, you're going to need a way to accept payments. One of the most popular payment methods is through bank transfers. In order to verify that the bank account exists and that it belongs to the actual buyer, an eCommerce store will need to do a bank account verification.

Merchants who accept checks: These types of merchants are always at risk of coming across customers with insufficient funds or those who gained unauthorized access to someone’s account. To protect themselves, the merchants request a photo ID from the check writer and verify the bank information.

You can also expect employers and landlords to perform banking verification. One of the reasons for this is because they need to share the verified information with government institutions to explain where their money is going or coming from. 

Furthermore, personal loan providers that cannot verify your credit score will likely ask you to verify your bank account and then check your income. Of course, you’ll have to provide the lenders with your bank account details to be able to receive your loan.

How Does Bank Verification Work?

When businesses and banks want to verify a bank account, they typically need three key pieces of information: the account holder’s name, bank account number, and routing number.

The latter two are typically used for identification as they are unique to each individual bank account.

The information needed for banking verification is available on any paper or digital check issued by the bank. It’s also available on one’s online bank account profile. The routing number typically contains nine digits, while bank accounts typically have ten to twelve numbers. 

If you’re providing this sort of information about your own accounts to another party, make sure they don’t have bad intentions. Anyone who has this information can attempt unauthorized transactions. 

When verifying your bank account information, the business may choose to make a test transaction. This will typically involve a small amount being deposited or withdrawn from the account to verify the bank account details.

The Benefits of Account Verification

There are several benefits to verifying your bank account. Below are the most notable ones:

  • The trust factor: By verifying your bank account, you are establishing yourself as a trustworthy customer. This will make it easier for you to do business with other businesses.
  • Easier transactions: Verifying your bank account makes it easier for businesses to process your transactions. This will save you time and effort.
  • Better customer service: Businesses that verify bank accounts are more likely to provide better customer service. Businesses can simplify the process by using card processing software or account verification services.

How to Avoid Scams 

The process of bank account verification online is variable to scams. The most common scams are listed below.

  • Phishing: This is a scam where the attacker poses as a legitimate business and sends a fraudulent message to trick you into revealing sensitive information. You’d be surprised how many people provide this type of information to impostors who use fake websites that look legitimate. Make sure you never provide your personal information to anyone unless you are sure they are who they say they are.
  • Identity theft: This is a scam where the attacker steals your personal information such as your Social Security number or bank account details to commit crimes. Don’t ever share your bank account verification number and other personal information if you aren’t confident about the intentions of the party you’re sending it to.
  • Credit card fraud: This involves the unauthorized use of credit cards to fraudulently make purchases or withdraw money. Be sure to keep your credit card information safe and never provide your account and routing numbers to anyone unless you are sure the organization is legitimate.

Tips for Choosing a Reliable Bank Account Verification Method

When choosing the right bank account verification method, there are several factors that you need to consider. The most important ones are listed below.

  • Type of business: Not all businesses use the same type of bank account verification method. Depending on what type of transactions you intend to perform, some businesses may only require your credit card details. Others will ask for your routing and account number to connect your account with their service. Some signature loan providers, for example, will require you to provide the latter two to check your eligibility.
  • Process duration: Some bank account number verification methods are more complicated than others and will take some time to complete. Make sure you are aware of how easy the verification method is before choosing it, but more importantly, make sure you understand how long the process takes. If you provide all of the information required, the entire process shouldn’t take longer than a few hours.
  • Reliability: Some bank account verification methods are more reliable than others. The most reliable options involve the use of multiple methods, including instant and trial deposit verification.

Bottom Line

Verifying your bank account is a wise decision that offers a range of benefits. This article provides all the information you need to better understand the bank account owner verification process and the different methods available.

Pick the most suitable option based on your needs and preferences. Some of the benefits of verifying your bank account include increased security, trustworthiness, and easier transactions.

If you are just starting your business and you need an easy way to verify the bank accounts of your partners, customers, or employees, consider using bank verification services.

Make sure that the service you are using is legitimate. Just like with everything else related to your finances, it’s important to be mindful of scammers and bad actors.

FAQ

How long does it take to verify a bank account?

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The duration of the verification process depends on the business verifying the account and the method being used. The process may take several hours or as long as five days.

How do I know if my bank account is active?

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In most cases, figuring out whether a bank account is active takes just a simple trip to the ATM or logging into your account online. If these aren’t suitable options, you can take a trip to your local branch and get the needed assistance there.

How do you verify a bank account?

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Businesses verifying bank accounts will typically request the account holder’s name, account number, and routing number. Depending on the type of transaction being made, the verification process may differ.

To complete it, you might need to provide only your credit card information, if you’re looking to pay for a product or service. Other times, businesses will need your routing and account numbers. If you run a business and need to perform bank account verification, you can use software or an appropriate API.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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