Account Verification Is the Only Way to Build Trust in Pay-by-Bank World

The promise of open banking is to foster a range of new products and services as banks link with FinTechs to use customer-permissioned data to tailor what they offer.

Within open banking — no matter the use case, but especially for pay by bank — account verification, and in some cases continuous validation, is a critical component of smooth onboarding and fraud prevention.

The PYMNTS Intelligence report “Can Open Banking Win Trust to Drive Real-Time Payments?” found that 46% of U.S. adults are interested in open banking, but adoption lags at a mere 11%. Fifty-seven percent of individuals trust their banks to deliver open banking services, which represents room for improvement.

New Partnerships Being Formed

The past few weeks have seen several partnerships and technologies that seek to verify bank account data and holders so that compliance is automated, and friction is minimal as fund flows move faster.

Europe-based identity solutions firm Signicat said Tuesday (Oct. 1) that it launched an open banking hub for global bank account verification. Its account checks are available alongside identity data spanning more than 35 digital identity schemes and over 170 remote identity verification methods. Account checks safeguard against fraud and data quality issues while verifying the name and bank account holder information.

FinTech CBI, which serves financial institutions and payment service providers, announced a partnership last month with Banfico, which offers account verification solutions. In terms of mechanics, CBI’s VoP service, called Name Check, is designed to ensure that IBAN codes are correctly matched with the names of beneficiaries before payments are processed. The partnership focuses on pan-European and cross-border markets.

Earlier this year, Dwolla and Visa partnered to bring advanced account verification capabilities to Dwolla’s account-to-account (A2A) solution, enabling Dwolla’s clients to instantly verify account ownership and check balances in real time. The solution is pre-integrated and provided through Dwolla’s single API and thus can reduce complexity, smooth the implementation process and accelerate the time to market for A2A payment solutions.

The verification efforts come as consumers have a positive outlook on pay by bank. The PYMNTS Intelligence report “Can Banks and FinTechs Bridge the Divide to an Open Banking Future?” found that 84% of pay-by-bank users reported high satisfaction with their pay-by-bank platforms, praising their speed and ease of use.

In the U.S., 36% of consumers use pay by bank, according to the PYMNTS Intelligence report “Tracking the Digital Payments Takeover: Consumer Familiarity Controls Account-to-Account Payment Growth.”

Of those who do not use pay by bank, 19% said they lack trust, while another 3.7% said the authentication process is long and complicated. Automated, tech-driven and real-time methods to verify accounts and safeguard them may go a long way toward eliminating those pain points.