By Melody Lashmar – NACHA recently published a survey to receive input regarding the various methods of account validation for the ACH network in particular. They provided some definitions and laid out 5 methods that they believe are being used and are sufficient for todays environment.
An Account Validation Service is a service wherein a business or financial institution can validate the accuracy of various elements of the account information received from a consumer or business, and the ability of that account to receive electronic payments.
There are five primary models currently used to validate account information:
Micro-deposit or Trial-deposit Method: The account number and the routing and transit number are validated by sending micro-deposits to the account. These credits are for random amounts, usually between two cents and one dollar, and the customer confirms that they have received the deposit and verifies the amount. In some cases, a micro-deposit and withdrawal verification process is used to confirm that funds can be both deposited and withdrawn from the account.
Instant Account Validation Method: The customer provides his online banking login credentials and the organization seeking to validate the account information uses these credentials to log into the account and validate the customer’s ownership of the bank account.
Check Verification Services: Using a service’s database, and/or other proprietary solutions, businesses have the ability to validate the accuracy of the account information of a check being presented.
ACH Prenotification Entry or Prenote: A Prenotification Entry is defined in the NACHA Operating Rules as a non-monetary Entry initiated by an Originator (any individual, corporation or other entity that initiates entries into the Automated Clearing House Network)to a Receiving Depository Financial Institution (RDFI) prior to the initiation of the first credit or debit entry to a Receiver’s account with the RDFI. A Prenotification notifies the RDFI that the Originator intends to initiate one or more credit or debit Entries to a Receiver’s account with that RDFI in accordance with the Receiver’s authorization.
Debit Card Authorization Method: A debit card “authorization only” request is sent using the card number provided by the consumer to confirm that the Demand Deposit Accounts (DDA) account number provided by the consumer is attached to the card.
What are your thoughts on the methods listed above?