Instant Account Verification is a method used for authenticating new accounts, funding accounts, and setting up recurring payments. IAV allows financial institutions to verify whether a customer’s source of funds is coming from a valid source or not in just seconds. Call it customer onboarding or account opening, in any case, instant account verification can help facilitate a brand new customer-business relationship with ease.
IAV helps banks seamlessly onboard customers who wish to start a relationship with an organization. However, the risk of financial fraud is making it harder for banks and financial institutions to onboard customers without verifying if they’re genuine or fake and if the funds come from legal sources.
Instant account verification mainly helps customers who already have a relationship with a bank to move money into their account. Let’s say a customer may want to move their money from Bank of America to Epic Bank. Instant bank account verification is a better solution than Micro-Deposit verification for moving money around.
Other use cases include setting up the verification process for recurring payments such as Venmo Cash App, as well as paying a utility bill or a car loan. That’s where the IAV helps in saving money and time during the process.
How Does IAV Work?
To use an instant account verification service, a customer needs to enter their username and password for the accounts that they need to verify. A financial aggregator then logs on to the behalf of their customer, securely returning the institution’s account number, routing number and balance and first name, last name, addresses, phone numbers, email addresses, and date of birth, and marks the date as verified.
Account types for personal and business accounts must include authentication including savings, money market, etc. In addition, once a customer is verified by an institution, they can complete their transaction.
IAV vs Micro Deposit Verification
To understand how important instant account verification is for financial institutions. IAV helps in eliminating the cumbersome. The outdated, and expensive process of verifying customers using two micro-deposits.
Micro deposit bank account verification utilizes two small deposits into the customer’s financial account. The customers then have to wait somewhere between 3 -5 business days for their deposits to appear in their account as well as the business asking for verification to validate their account.
Customers waiting for micro-deposits to reflect into their account often forget to check back into their account if the payment has happened. By the time they actually remember to check back, most customers have lost the enthusiasm about opening an account with the entity.
According to a study, 40% of all customers give up on the account opening process because of the absurd time taken.
Most customers leave the customer onboarding process if there is too much work or if something goes wrong. With so many options available in the industry, customers will move on to some other service provider without thinking twice.
The initial moments of onboarding are crucial, and if something goes wrong the customers will leave and go to your competitors. They’re the most essential moments and they define if a business is en route to success or failure.
That’s why instant account verification is becoming more popular among customers and financial institutions. By streamlining the onboarding process, banks, financial institutions, and so on can ensure that the customers follow through with the onboarding process.
Any process that significantly reduces the time taken between making a purchase and actually going through the purchase will win the competition.
To provide better insight, the onboarding drop-off rate for businesses using micro deposit is around 49% while the drop-off rate for organizations using instant account verification is less than 5%. To sum up all the facts, instant account verification is more cost-efficient for businesses.
Micro deposits cost around $1 per transaction, whereas IAV costs almost half of that. What’s more, in a number of cases customers start the verification process and leave before completion, this way the businesses take a hit of $1 per person.
With a 49% drop-off rate on micro deposit verification, if a business pays $.85 then the total loss of onboarding 50K customers is $177,701.25.
That’s why it is vital to use the online account opening process and external ACH transfers. Here are the benefits of using online technologies:
- Reduce account abandonment
- Reduce failed payments for nonexistent accounts
- Reduce fraud associated with incorrect accounts
Comparing micro deposit verification with instant account verification clearly states that the IAV process is better for both customers and businesses.
Open Banking Authentication Connections and IAV
While banks and financial institutions look for instant account verification solutions, it’s the best idea to find open banking authentication connections.
These APIs can use tokenized credentials, thus increasing the overall customer security. Tokenized credentials mean that customers can be verified by giving credentials to any third parties.
In other words, the users submit credentials directly to the bank via the bank login screen, and then the banks send tokens to third-party providers.