Bank verification is used by lenders to prove that the borrower is who they claim to be and to verify the activity in the borrower’s account. Lenders typically rely on other companies, like Quovo or Yodlee, to perform bank verifications.
Bank verification is a process where a financial institution or company confirms an individual’s bank account information. Verifying someone’s banking info can help companies making or receiving payments ensure that the account is correct.
What is Bank Verification?
Bank verification is simply a way for companies to confirm the fact that someone has a bank account. With a few pieces of information, companies can verify an individual’s bank account and properly record any payments or transactions that may occur with that individual in the future. Bank verifications are required in some instances by law, so the process must be efficient and accurate. Bank verification is common for things like online loans, and other personal loans.
How Does Bank Verification Work?
When a company wants to verify a bank account, they request a few pieces of information. These are:
- Account holder’s name
- Bank account number
- Routing number
Since every individual’s bank account has a unique routing and account number, you can verify your bank account by passing along this information. Routing numbers typically consist of nine digits, while bank account numbers normally have ten to twelve. You can locate both of these sets of numbers by looking at the bottom of any paper or digital check associated with your bank account, or you can almost always access this info via your online bank account profile.
If you’ve ever had an employer ask for a voided check on your first day of work, they are most likely requesting that information to verify your bank account and set up Direct depositfor your future payments. That being said, you want to make sure you are always careful about who you share your bank account and routing number with, as this sensitive information could easily be used against you if it falls into the wrong hands.
Access to your account and routing number can essentially mean access to your bank account directly. If an untrusted party has access to your name, bank account, and routing numbers, they could potentially use that information to attempt financial transactions.
But despite the risks, it’s still important to have a bank account. There are many benefits to having your own checking account including the fact that it could help you better manage your money.
How Long Does Bank Verification Take?
Bank verification is typically a swift process since just a few pieces of information are required. Once the party performing the bank verification has everything they need, all they have to do is reach out and confirm the accuracy of the information. Given everything is correct, a simple bank verification can take just a few hours in some cases.
The process can get much more lengthy if information comes back inaccurate, causing a bank verification to fail. Giving false bank information and trying to pass it off as your own is an illegal offense that can result in heavy fines or even jail time. These consequences apply to both the individual giving the false information and potentially the company or business if they’ve accepted the false information.
The legal procedures for carrying out these kinds of consequences can take anywhere from a few months to a few years. So, to avoid the stress of dealing with this kind of situation, always make sure you give accurate and truthful information when going through a bank verification.
Who Does Bank Verification?
Who has to do bank verifications, and why? Well, there are several types of places that do bank verifications regularly for varying reasons. Here are a few examples:
Employers
Businesses go through bank verifications usually for two reasons. The first is that they are confirming a new employee’s bank information to properly pay them for their work. The second is to report that verified info to the state or federal government to prove where certain portions of their money are going.
Credit Reporting Agencies
The major credit reporting agencies (Experian, Transunion, and Equifax), require bank account information in order to run credit checks and determine someone’s credit score. Since credit history and accounts contribute to credit scores, these agencies need accurate banking info.
Government Officials
State and federal governments require records and bank verifications to keep track of the money certain companies and taxable entities are spending and make sure that the money is appropriately designated.
How Could Bank Verification Help Prevent Fraud?
In order to get a bank account in the first place, banks require essential personal information that only specific individuals would have. For example, when you set up a bank account, you must give the bank your social security number, which you shouldn’t share except when required by legitimate institutions. Since such private information is connected to bank accounts, companies can be assured that if someone has passed a bank verification, their account is legitimate.
Keep in mind that there are plenty of frauds and scams associated with personal loans and bank accounts. Be sure to familiarize yourself with the red flags.
Resource:
What is a Routing Number
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