Why Bank Account Validation Is So Important
With how competitive business has become around the world, protecting a business from fraud and late payments as well as ensuring positive cash flow has become very important.
Every business must assess its books and how it collects payments to find out whether it is profitable or heading towards insolvency. One way to protect businesses from payments that negatively impact cash flow, and therefore revenues, is business account validation. In this article, we will look at what it is and why it is so important for businesses.
Here Are Five Reasons For What Bank Account Validation Is Important:
1. Bank Account Validation
Bank account validation is a process where a business check to ensure the payment information provided by a user or customers is valid. It also checks that the account is set up right so that it can make payments to the business account.
By knowing that the account exists, and the information is correct, a business can reduce risk, late payments, and even dropped payments.
So, how do businesses do this? The easiest way to do this is through platforms like Envestnet | Yodlee which provides near-instantaneous bank account validation services.
They check different types of bank accounts regardless of the verification path used to verify these accounts. Besides their bank account validation systems and processes, Envestnet | Yodlee also creates various fintech solutions for entrepreneurs, businesses, and financial institutions, all centered around finances and payments.
2. Fighting Fraud
The first reason every business should validate bank accounts is to prevent fraud. Fraud happens when someone uses a credit card that they do not own to make a purchase. They then make a chargeback request so that they end up with the goods and the money.
In most cases, the real owner of the credit card notices and initiates the chargeback. Regardless, the business is left looking at a loss because it will have sent out goods without being paid for them.
By validating bank accounts, businesses can stop these transactions before they happen. This solution can be even more effective if used alongside identity and address verification.
3. To Check if an Account is a Business or Personal Account
An overwhelming majority of fraud happens on personal accounts. Business accounts are hit, but not as much. A business that is doing business with another can verify that the second business is using the card belonging to the entity instead of the owner.
While this will not stop fraud completely, it can reduce risk to the first business if it stops transactions happening on personal accounts.
The exception is businesses that sell directly to customers where this check would not be required as almost everyone will be using a personal credit card or bank account.
4. Additional Security
The verification process provides additional security to both the business and the customers. This is because everything happens on a very secure network so there are no leakages of customer or company data.
This additional security can improve customer experience and therefore loyalty towards the business. Bank account validation is crucial for any business that accepts digital payment.
In addition to minimizing risk to the business, it also helps protect customers who would otherwise have lost a lot of money if their card was used fraudulently.
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