In the world of real-time ACH payments, open banking instant account verification is quickly making the old, manual methods look like the rotary phone. Why use an unreliable relic, when there’s a better, more secure, faster innovation? Throughout the years, financial institutions have relied on voided checks, manual routing and account number input by the consumer and microdeposits. These require days or weeks to complete, and are prone to errors or fraud.
More recently, data consortiums were used to confirm customer-submitted account details, checking them against existing databases. This assisted with clearing Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. Mixed-solution authenticators provided a fraud risk rating for the account being verified, but their information was sometimes based on older data. At best, these methods yielded only a sensible prediction of risk. With FinicityPay, failed payment risk is mitigated by obtaining account owner and balance insights prior to processing.
Previous methods of verification were rife with processing delays and lost revenue due to failed payments and fraud. Open banking APIs and platforms are the next evolution of payments. Faster, more secure and more transparent.
Open Banking Platforms Create a Real-Time Network of Connections to Financial Institutions
- Trusted financial data aggregation platforms facilitate secure access to consumer-permissioned data via traditional connections (enriched with bank-level security) and APIs.
- Tokenized access to account credentials is granted to third-party financial services innovators, utility providers and investment platforms, opening up consumer options.
- Open banking is making third-party ACH payments faster and more secure, maximizing savings, rewards and investment opportunities.
- A simple account balance check smooths the pre-funding path and protects consumers and merchants alike from failed payments and potential fees.
Using secure, consumer-permissioned access, financial institutions and vendors now get instant account balances and data from a consumer’s bank. Owner details, addresses, account and routing numbers and real-time balances are all immediately available. They can be scrutinized before authorizing payments on an open banking platform. Account access credentials are packaged into a “token” that can be passed to a third party. It yields no meaningful data if intercepted and hacked. This new level of security is spawning a much larger, more niche-oriented market of financial services providers and app developers. Open banking applications allow users to move money at the speed of the market.
Open Banking Opens Up Payment Enablement and Authentication
- Innovation across all data-sharing stakeholders in the ecosystem expands what you can do to verify data and customize it to fit your payment use cases.
- New technologies like AI are now available to integrate into your user experience. Move customers through your account setup process quickly and intuitively, while gaining permission to curated data that fits your needs.
- Once an account is authenticated, payments from it can be issued instantly (dependent upon market/account providers) throughout your suite of products. Financial management, investment, utilities and recurring payments are all open for immediate money movement.
All of this has been revolutionary for consumers. Their mobile phones are full of financial services options powered by open banking, and they’re adopting them at a rapid pace. With a few taps on the screen, a user can grant permission to third-party apps and platforms, without having to type in account or routing numbers. The app or service the user wants to access is up and running with a full package of information pre-loaded. Secure, real-time ACH payments can be made within moments of installing and setting up an app. With the richer level of insight that’s available through consumer-permissioned data, developers are giving consumers a wealth of new options for managing, spending, and borrowing money. This is industry-changing innovation. It’s giving consumers more flexibility and ownership of their financial position than ever before.
Open Banking Simplifies the Payments Experience for Consumers
- Customers aren’t asked to supply sensitive information, just permission to their accounts.
- No more waiting periods for further verifications, like microdeposits or database checks. The customer’s data is pulled in milliseconds and rolled into the app they’re using, making real-time payments a breeze.
- Financial management apps with AI integration pull together a holistic picture of the consumer’s moment-to-moment financial well-being.
While authenticating account details, ownership and current balance can streamline your payment process, it also reduces the hassle of setting up accounts and making payments for your customers. Enhancing their experience, especially when setting up payment is one of the first interactions they have with you.
Learn more about Finicity’s data solutions for verifying account details, account ownership, and check balances here.