Verify bank account: business tools and how to associate number and holder

Bank account verification is a crucial step in the process of customer identification and validation and digital onboarding for companies in various industries. This process ensures the authenticity of the banking information provided and is essential to comply with Know Your Customer (KYC), Business Verification (KYB) and Anti-Money Laundering (AML) regulations.

In addition, integrating it allows bank scrapping and reading, building automated customer scores that allow to enable in seconds customer registrations and product activation or pre-approval of certain types of service. Establishing a single flow of identity verification, KYC/KYB/AML controls, risk and bank score verification and electronic signature of the contract is now possible thanks to the new RegTech technologies.

The financial management,operations risk assessment and regulatory compliance of any company handling relevant transactions can be automated. In this content, we will explore in detail how to verify a bank account, the tools available to companies and the relevant regulations, such as PSD3 and SCA.

Why do you need to verify a bank account?

Bank account verification serves multiple purposes that are vital for security and regulatory compliance. In many cases, companies need to confirm that the person or company has a bank account for direct debit, that it belongs to them and that they are who they say they are. This applies to customers, suppliers, partners or any operation that requires due diligence processes:

• Fraud prevention: Verifying the bank account helps prevent financial fraud by ensuring that the account belongs to the person or entity that provided it. This step is essential to avoid fraudulent transactions that can harm both the company and its customers.
• Regulatory compliance: KYC, KYB and AML regulations require companies to verify the identity of their customers and the authenticity of their bank accounts, as well as other rules of industry regulators. Failure to comply with these regulations can result in severe penalties and reputational damage.
• Financial security and viability of the operation: Guarantees that financial transactions are carried out securely and that the funds reach the correct recipient. In many cases, it is often necessary to make a connection with the bank to obtain risk scores or finscores to evaluate the viability of granting a loan, a mortgage or an insurance offer. This is particularly important to avoid costly mistakes and potential loss of money.
• Customer Confidence: Provides an additional level of trust and confidence to customers, assuring them that their data is protected and transactions are secure. A rigorous verification process can improve the perception of the company and foster long-term relationships with customers.

Verify bank account number and account holder

Bank account verification is an essential process to ensure the authenticity of transactions and comply with financial regulations. This process not only helps prevent fraud, but also ensures that companies and customers operate within the established legal framework. In an environment where digital transactions are increasingly common, bank account verification has become more sophisticated and technological. 

Here is a detailed guide on how to verify a bank account, including a variety of methods that combine traditional techniques and advanced technologies. Verifying the bank account number and account holder involves confirming that the account is active and belongs to the individual or company claiming to be the owner, as well as confirming a certain number of recent transactions in certain cases. This process can include several methods, such as:

• Test Transfers: Make a small test transfer that must be confirmed by the account holder. This method is common and effective, as it allows verification of the account's ability to receive funds.
• Official documentation processing: Request official documents such as bank statements, certificates of title or letters from the bank. These documents provide tangible proof of the relationship between the account holder and the account and are validated and processed by RegTech players' KYC/KYB document processing and OCR tools in an automated way.

Electronic Verification Services: Use electronic services that connect to bank databases to verify information in real time. These services can provide instant verification and reduce the risk of human error.

How to verify a bank account

The process for verifying a bank account may vary depending on the technology and services used. The following are the most common steps:

1. Data Collection via DB and KYC forms: Collect the customer's banking information, including account number, account holder name, and bank. This information is the basis for all subsequent steps and must be collected accurately.
2. Information Validation: Use validation tools to check the accuracy of the data provided. This stage may include verification of account number formats and bank validation.
3. Verification of Ownership: Confirm that the name of the owner matches the name registered with the bank. This can be done by data comparison or by using automated verification services.
4. Confirmation of Active Account: Ensure that the account is active and able to receive and send funds. This may include making a test transfer or receiving confirmation from the bank.

Audit and Record Keeping: Maintain a record of verification for audit and compliance purposes. This record is essential to demonstrate compliance and may be required in regulatory audits or inspections.

Bank account verification can be carried out using a variety of methods, each with its own advantages and disadvantages. From traditional techniques such as test transfers and official documentation review, to advanced technological solutions provided by RegTech companies, the options are wide and diversified. Below, we will explore these methods in detail, highlighting how they can be combined to ensure thorough and secure verification, aligned with industry best practices and regulatory requirements.

1. Test Transfers: This method involves making a small test transfer to the client's bank account, which must be confirmed by the account holder.

Advantages:

• Simplicity: Easy to implement and understand for both the company and the customer.
• Effectiveness: Confirms that the account is active and that the customer has access to it.

Disadvantages:

• Time: It may take several days, depending on the bank and country.
• Costs: Even if the transaction is minimal, multiple transfers can accumulate costs of various types.
• Operating complications: Betting on this system means setting up too many integrations that complicate operation and lengthen verification times.

2. Official Documentation: Request official documents from the bank, such as bank statements or verification letters confirming the ownership of the account.

Advantages:

• Reliability: Official documents provide tangible and reliable verification.
• Wide Acceptance: This method is widely accepted by regulators and auditors.
• Automated by software such as Tecalis: Thanks to Tecalis Identity's second-generation IA-OCR technology, the processing and validation of this type of document is simple and 100% automated.

Disadvantages:

• Time: Document retrieval and review can be time-consuming for human reviewers, so automated solutions such as Tecalis are available.
• Counterfeit Risk: There is a possibility of documents being forged, although this can be mitigated with additional checks and tools such as Tecalis, which are totally foolproof against fraud.

3. Integrated Banking APIs in Tecalis KYC Onboarding: Use banking APIs to connect directly with banks and verify account information in real time.

Advantages:

• Speed: Instant verification in real time.
• Accuracy: Reduction of human errors by using automated systems.
• Increased information gathering: Enables new use cases and risk scoring.

Disadvantages:

• Technical Integration: Requires technical integration with banking systems, something that Tecalis can do with great simplicity.

4. Bank Scrapping or Reading: Bank scrapping involves the use of software to extract data directly from the web interfaces of banks and FinTechs.

Advantages:

• Automation: Minimizes human intervention, speeding up the process.
• Accuracy: Data is extracted directly from the source, reducing the risk of errors.

5. Electronic Verification with RegTech systems: Use electronic verification services provided by RegTech companies, such as Tecalis, which connect to databases and banking systems to verify information in real time.

Advantages:

• Efficiency: Fast and automated process.
• Regulatory Compliance: RegTech solutions are designed to comply with KYC, KYB and AML regulations.

Disadvantages:

• Technology Dependency: Requires a robust technology infrastructure. This is now solved thanks to Tecalis SaaS models.

By relying on advanced and scalable technologies, companies can ensure the authenticity of their customers' bank accounts in an efficient and secure manner. Choosing the right method will depend on several factors, including the company's risk level, budget and technology infrastructure. With the continued advancement of RegTech technologies and the implementation of stringent regulations such as PSD3 and SCA, the bank verification process will continue to evolve, providing increasingly secure and effective solutions.

RegTech tools to verify bank accounts

RegTech technology has transformed the way companies perform bank account verification, providing faster, cheaper, more accurate and secure solutions. Some of the most widely used tools include:

• Banking APIs: Allow direct integration with banks to verify data in real time. These APIs can access the customer's banking information with their consent, providing instant verification.
• Artificial Intelligence (AI): Uses advanced algorithms to analyze and verify banking data. AI can identify patterns and anomalies that could indicate fraud or data errors.
• Blockchain: Provides a secure and transparent way to record and verify transactions. Blockchain technology can be used to ensure data integrity and provide a clear and traceable audit trail of all transactions.
• Bank Scrapping/Reading Software: Extracts data from banking websites to validate information. This software can automate data collection and provide fast and accurate verification.

Account verification in digital onboarding KYC, KYB, and AML

Bank account verification is an essential part of digital onboarding in KYC, KYB and AML processes. These procedures ensure that companies comply with financial regulations and protect against fraudulent activities. Digital onboarding has evolved significantly in recent years, integrating advanced technologies to improve the accuracy and efficiency of the discharge process. Their integration and operation provides companies with different capabilities in these processes:

1. Information Collection: During the onboarding process, detailed customer information is collected, including personal and bank details. This information is used to perform initial verifications.
2. Identity Verification: Using technologies such as biometric verification and artificial intelligence, companies can confirm customer identity. This can include comparing identity documents with selfies in real time.
3. Bank Account Verification: The bank information provided by the customer is verified using banking APIs, test transfers or electronic verification services. This step ensures that the account belongs to the customer and is active.
4. Risk Assessment: The data collected is analyzed to assess the risk associated with the customer. This may include review of transaction history, financial behavior and other relevant metrics.
5. Regulatory Compliance: A comprehensive check is performed to ensure compliance with KYC, KYB and AML regulations. This includes review of sanctions lists, PEPs (Politically Exposed Persons) and other relevant databases.
6. Digital contracting and electronic signature for instant registration: In industries such as telecommunications, BFSI (Banking, Financial Services and Insurance) or utilities, the contract signature can be integrated after KYC identity verification and bank scraping to, for example, pre-grant mortgages or microcredits instantly or register a phone number directly and have the customer complete the process with their SIM or eSIM activated instantly.
7. Approval and Ongoing Monitoring: Once the customer has been verified and approved, ongoing monitoring systems are implemented to detect any suspicious activity. This includes real-time transaction surveillance and periodic updating of customer information.

How open banking helps verify accounts

Open banking is a system that allows banks to share customer financial data with third parties through secure APIs, with the customer's consent. This system has been implemented in many regions to foster competition and innovation in the financial sector. Its most important aspects are:

1. Transparency and Control: Open banking gives customers more control over their financial data, allowing them to decide who can access their information and how it is used.
2. Competition and Innovation: Allowing third parties to access banking data fosters competition and innovation in the financial sector. Fintech companies can develop new products and services that benefit consumers.
3. Security and Privacy: Although data is more widely shared, open banking relies on secure APIs and explicit customer consent, ensuring that data is handled securely.
4. Improved Customer Experience: Customers can benefit from more personalized and efficient financial services, such as better loan options, financial management tools and faster payment services.

PSD3 and SCA in bank account verification

The Payment Services Directive 3 (PSD3) and the SCA are European standards that seek to improve security and transparency in electronic payments and bank account verification. PSD3 sets standards for payment authentication and customer data protection, while SCA requires stronger authentication, such as two-factor authentication, to verify transactions and bank accounts.

PSD3 aims to strengthen the security of electronic payments, increase transparency and promote innovation in payment services. It applies to all payment service providers within the EU. It sets strict requirements for data and transaction security, including strong customer authentication (SCA) and fraud protection.

1. Transparency and Consumer Protection: The directive requires greater transparency in the rates and conditions of payment services, ensuring that consumers are well informed.
2. Data Access: PSD3 facilitates third-party access to banking data with customer consent, promoting open banking and competition in the sector.

SCA (Strong Customer Authentication) is a set of authentication requirements that ensure that electronic transactions are initiated and approved by the legitimate customer, in addition to enabling customer login to open banking platforms. Its purpose is to reduce fraud and increase payment security.

Tecalis: Bank scrapping and automated reading

Tecalis offers advanced solutions for bank account verification and digital onboarding. Its bank scraping and automated reading tools allow to extract and analyze bank data in an efficient, legal and secure way. These solutions are designed to be easily integrated into corporate systems, providing fast and accurate verification that complies with KYC, KYB and AML regulations.

Using the right tools and technologies not only ensures that companies comply with regulations, but also protect their customers and improve operational efficiency by saving costs and processing time to a minimum (instant in many cases). With the advancement of technology and the implementation of regulations such as PSD3 and SCA, the bank verification process will continue to evolve, providing even more secure and efficient solutions for all involved.

Bank Scrapping

Bank scrapping is a technique that allows to extract and analyze data from banking websites in an automated way. This technique is used to verify banking information quickly and accurately and to create customer scores according to defined parameters and the operation to be performed. Among its many advantages, we highlight:

• Automation: Reduces the need for manual intervention, which speeds up the verification process.
• Accuracy: Minimizes the risk of human error by extracting and processing data directly from the source.
• Compliance: Ensures that data is obtained and handled in accordance with privacy and security regulations.

Bank Reading 

Automated bank reading uses technologies such as OCR (Optical Character Recognition) and AI to read and process financial documents. This tool is especially useful for verifying bank statements and other official documents, invoices and more. Its benefits help companies save costs and enable new use cases:

• Efficiency: Processes large volumes of documents in a short time, which speeds up onboarding.
• Accuracy: AI technology ensures that data is extracted with high accuracy, reducing the risk of errors.
• Integration: It can be easily integrated into companies' systems, providing a complete solution for digital onboarding.

Digital Onboarding Integration

1. Simplified Process: Tecalis tools are integrated into the digital onboarding workflow, providing fast and secure verification of banking data.
2. Regulatory Compliance: These tools are designed to comply with KYC, KYB and AML regulations, ensuring that companies maintain high standards of security and compliance.
3. Customer Experience: By reducing the time and complexity of the verification process, the customer experience is improved, making it smoother and more satisfying.

In summary, companies must adopt a comprehensive, technology-driven approach to bank account verification or automated notarization and power of attorney verification, using the latest RegTech tools and complying with the most stringent regulations to ensure trust and security in all transactions.

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