Account verification allows companies to verify that a bank account really belongs to a specific user. Find out how open finance is helping zeroing out the risk of fraud and the propensity for manual errors during this process.
Table of Contents
- What does account verification have to do with open finance?
- How can open finance account verification improve your business?
- Who can benefit from account verification with open finance?
- Far beyond account verification
There are many reasons why a company might need a user’s banking information: among the most common is the need to bill or send money. It can also be a key part of the onboarding process for many fintech products which require the user to proof that they can send or receive money in a bank account.
Historically, companies have relied on users to provide this information manually. For example, by submitting a bank statement. However, incredible as it may seem, people are prone to make mistakes, or even (shocker!) try to commit fraud 😱. Not to mention all the friction involved in the process, which ends up involving unnecessary steps.
This is where the world of open finance comes in: with instant access to the user’s reliable banking data, companies are able to easily verify their accounts, free from the risk of manual errors or fraud.
What does account verification have to do with open finance?
With this movement, data sharing becomes much more fluid, including basic data such as whether or not the user owns a certain bank account. So, provided the user consents, verifying whether a particular bank account belongs to the user can be done automatically, via an API, in a matter of seconds. All this without depending on any further authorization from the financial institution.
Open finance is basically a model that allows the user to be the owner of their own financial data and decide with whom they want to share it with – instead of it being tied up with the financial institution where it is hosted.
With this new model, which is also being pushed through regulation, data sharing becomes much more fluid, including basic data such as whether or not the user owns a certain bank account, as well as which products are associated to it.
Thanks to this, and always with the users’ express consent, verifying whether a particular bank account belongs to the user can be done automatically, via an API, in a matter of seconds. All this without depending on any additional manual processes or paperwork required.
How can open finance account verification improve your business?
There are several benefits that businesses can derive from the speeding up the account verification process, including:
- Improve the user experience when opening a new account, for example, in a neobank.
- Verify information instantly, for instance, when users are applying for a service like a loan.
- Increase conversion in onboarding processes, as applying for an investment.
- Save time and reduce manual processes, take a ERP’s for example.
Below, we describe in detail a bit of the two main pillars of these benefits.
🔐 Reduce risks
Imagine that your company mistakenly transferred over U$ 60,000 to the wrong recipient, all because of a typo. You try to ask for the money back, however, the person who received it by mistake says they can’t, because they already put the down payment on a property with the value. Now your company has to go to court to get the money back.
It sounds like an absurd story, doesn’t it? Well, it happened with the biggest Brazilian TV network earlier this year.
The amounts don’t have to be so large to cause headaches for the user and the company. One support ticket for a refund that is open longer than it should be can be more than enough for a bad experience. But well, let’s talk more about that later 👨🏫
Besides harming the user experience, a manual process ends up implying higher operational costs, both to ensure the security of the operation, and to monitor the process.
⚔️ The friction
In times of Netflix, Amazon and Google Pay, users are looking for services that are not only more secure, but that occur fluidly and without demanding too much from them. An unnecessary screen, a question beyond what is expected, or redundant verification can be more than enough to lose the user forever.
The combination of account verification and Open Finance allows you to avoid having to ask your customers for their banking details every time you move money with them. This can be specially useful for private pension and investment platforms, for example as in the case of Saks, reducing friction costs dizzyingly.
“The automated process [of verifying accounts] will make life easier for investors who feel it is very difficult to access the identification data of their pension plans”Cristiano Falcone, CCO at Saks
Who can benefit from account verification with open finance?
Anywhere where you need to provide your banking data in order to receive a service, which includes many fintech and proptech services but also traditional businesses that operate online such as car selling platforms, insurance companies, e-commerces and marketplaces, banks, investment platforms… The size of the list depends only on your imagination!
Far beyond account verification
Account verification is just one of the products Belvo offers so that financial innovation continues to thrive in Latin America.
Now that you know how account verification works, why not take a look at some of our more complex products?