Instant Bank Verification (IBV)

What is IBV?

IBV, meaning instant bank verification, validates that a bank account number and account details are valid before a transaction is processed. Verifying account details is especially important when processing a check or ACH payment in order to reduce fraud.

At its essence, bank account verification and account validation add accuracy and speed to a process that used to involve faxing over copies of financial documents and waiting several weeks for verification. With IBV, the result is a speedier and more reliable, real-time accounting of a borrower’s financial picture, which is crucial in today’s fast-paced market

Remember the fax machine? For most, it’s a distant memory thanks in part to advances in FinTech such as instant account verification (IAV). These days, when a consumer seeks to open a financial account, set up recurring payments or apply for a loan, their bank account and other financial information needs to be verified quickly. This is partly to ensure the consumer’s financials match up with what they report, but also to prevent fraudsters from entering the picture.

How Does The Instant Bank Verification Process Work?

Here’s how it works.

A consumer sets out to find a financial institution to work with, one that will fit all their needs. In order to open the account, they must provide access to their existing financial accounts to validate their identity. A third-party verification provider such as Yodlee | Envestnet makes the connection between the consumer and the financial institution by electronically contacting the bank’s API. What used to take multiple business days — or even weeks — now takes place almost instantaneously through the following steps.

User Authorization

The customer grants permission to access their financial information by logging into their online banking credentials through a portal.

Connection and Data Retrieval

The verification system connects to the customer's bank and pulls relevant account data, including account balances and transaction history.

Verification

The system then analyzes the retrieved data to confirm account ownership, checks for sufficient funds, and validates account status and transaction patterns.

Confirmation 

The process concludes with a report confirming the account's validity and providing relevant financial details to the requesting business.

Benefits to Using IBV 

The benefits of instant bank verification are numerous when compared with traditional verification methods.

Better Customer Experience & Quick Results

Instant bank verification provides a digital experience, rather than a paper-based, time-consuming one. This matches up with customer expectations for apps today. In the past, to verify an account, forms needed to be printed and voided checks needed to be sent via mail, significantly slowing the process. The digital experience of instant bank verification happens in real time, which is something consumers have come to expect in a digital world.

Reduce Possibility of Fraud

The instant bank verification process confirms access and ownership of an account, reducing the possibility of fraud. Different types of data elements such as name and phone number can be used to validate the customer’s ownership of the bank account. Other information can be leveraged to help with fraud monitoring, such as whether an account is in good standing, with regular transactions such as payments and withdrawals taking place.

The ability to see current and available balances for a given account further helps prevent fraud. These verification methods help to streamline the process for both the financial institution and the customer. Yodlee pioneered these changes in the late 2000s, and today, we verify over 70,000 accounts daily. Together, our verification and fraud prevention measures speed verification while helping to protect institutions from risk.

Greater Security

Instant bank verification protects sensitive financial data through end-to-end encrypted API connections, which create secure tunnels for transmitting information between banks and verification services. These encrypted connections use advanced protocols and tokenization to help safeguard account details from being intercepted or compromised by cybercriminals during the verification process.

Easy Compliance

Envestnet | Yodlee is a Preferred Partner of NACHA, the National Automated Clearinghouse Association, which oversees the movement of money through the ACH system in the United States. Our bank account verification solutions meet — and often exceed — NACHA’s Web Debit Account Validation Rule. 

What are the Common Use Cases?

Onboarding New Customers

Instant bank verification works for a variety of financial institution types, from banks that offer online banking, to FinTechs and more. Banks and investment firms typically use IBV as part of their onboarding process when bringing on new customers. Let’s say a new customer opens a brokerage/trading account. The first step is to add funding to their account so they can begin trading and investing. Envestnet | Yodlee’s Account Verification tools quickly confirm that the customer has available funds, allowing for a near-instant account setup.

Online Payments

Other use cases where IBV comes into play include customers who log on to their cell phone provider’s website to make a one-time or recurring payment. IBV is particularly appealing here, because when customers pay with a credit card, the merchant is typically charged a fee between 2 and 2.5 percent.

Loan Applications

Lenders use instant bank account verification alongside credit reporting to quickly confirm a borrower's account details, income patterns, and financial health before approving loans or credit lines. This real-time verification helps lenders make faster, more informed decisions while reducing fraud risk and eliminating the need to review paper bank statements.

Direct Deposits

Employers can streamline payroll processing by using instant bank verification to automatically validate employees' routing numbers and banking information, eliminating manual data entry errors. This verification helps to ensure direct deposits go to the correct accounts and assist employers in maintaining accurate payroll records while protecting sensitive financial data. 

Get Started With Envestnet | Yodlee

To be certain your users are who they say they are, it’s important to work with a trusted third-party that can accurately and quickly verify your customers’ credentials. Details such as address, email, phone number and other critical information help authenticate the user while reducing the risk of fraud.

Concerned that setting up a verification system is difficult? Envestnet | Yodlee’s Account Verification solution is easy to implement, flexible, and scalable, removing the complexity for your business and customers. See how it works with our Quickstart guide, which aims to take developers from introduction to coding in as little as one hour.

At Envestnet | Yodlee, our solutions are designed to seamlessly verify potential customers so they can do business with you in no time.