Small business service providers, property owners and anyone else who accepts checks or electronic payments often use bank account validation as a tool to mitigate risk. Depending on your needs and the numbers of annual verifications, this can be done manually or through fee-based electronic methods. As a first step, inform your customer or tenant in advance that you intend to validate the account.
How It Works
The goal of bank account validation is to help you make good business decisions. For some businesses, simply knowing whether a customer’s checking or savings account is open is not enough. Although a validation system cannot make decisions for you, most will include recommendations with verification results. For example, after you scan a check or input the bank account information and transaction amount, a message such as “accept,” “deny” or “ABA validated” may appear. An accept or deny message refers to a customer’s history, or lack of history with writing bad checks, while an American Bankers Association reference means the bank's identification number is valid.
Do It Yourself
Manual verification is a no-cost choice when your only objective is to verify the information links to a valid bank account. Contact the financial institution and either tell the telephone representative that you want to validate an account or follow instructions if the bank performs auto account verifications. You’ll need the account owners name and the full account number. For security reasons, a bank will not release current balance and other information about the account.
Fee-based online verification is available if you need more information, such as when account verification is part of a credit application. To use it, you’ll need the nine-digit bank routing number in addition to the account holders name and account number. In general, a fee-based service will not only verify that a bank account is valid, but also if it's a checking or savings account, the opening date and the account holders name.
Small business owners who accept electronic payments can use an Automated Clearing House network to access a customer’s bank account, verify information and transfer funds in real time. An ACH system links participating financial institutions into a network. According to ACH Works, validation services, which are available for in-person and online businesses, can include both current and historical information. The service first checks to see if an account is open and in good standing. A second validation level searches the customer's record for bounced checks.