Account Validation: A guide to Web Debit Compliance

Account verification is required for maintaining compliance with Nacha’s WEB Debit Rule. ValidiFI developed a guide on the various methods of account validation to help ensure you meet these requirements.

The Web Debit Account Validation rule, effective since March 19th, 2021, requires ACH originators to use a “commercially reasonable fraudulent transaction detection system” to screen for fraud prior to initiating a payment. 

Whether you need simple compliance or require Account Ownership validation prior to make a high-value payment, there are different forms of account validation to choose from. Check out the guide to discover which type is best for your business.

Methods of Bank Account Verification: Prenotes, Micro-deposits, Validation Services

Options currently exist for verifying account ownership, including the use of prenotes, micro deposits, and validation services. Here is a brief synopsis of each solution:

Prenotes

A prenote validates the accuracy of provided bank account information by sending an ACH transaction to the user’s bank. A prenote is considered successful if there is no ACH Return or Notification of Change related to it. In case of a return, specific details from the return code are used to update account information before proceeding with fund transfers or another prenote. This process confirms the account’s openness to receiving ACH transactions. Prenotes offer a frictionless experience for consumers as no action is required on their part. However, the drawback lies in the processing time, which typically ranges from 2 to 4 days.

Microdeposits

A microdeposit serves as another method for validating bank accounts. It involves sending a small ACH transaction, typically ranging from $.01 to $.03, into the customer’s bank account and awaiting the outcome. Newer versions incorporate consumer interaction, where the consumer logs in to verify the deposited amount. This process confirms the accuracy of the account number, its capability to accept ACH transactions, and the consumer’s access to the account. Microdeposits now leverage the Real-Time Payments network and FedNow, enabling deposits within seconds. However, microdeposits introduce friction and have less than 100% coverage of RTP/FedNow.

Validation Services

Third-party validation services offer an alternative for verifying accounts. These services grant their systems access to bank accounts, allowing them to determine the likelihood of account ownership and ensure data accuracy. This process validates the account number’s validity, its capability to handle ACH transactions, consumer access, and provides additional details. Depending on the specific use case, these service providers offer both non-credentialed and credentialed options. One advantage of utilizing these services is their ability to process verifications in real-time. However, many validation services face challenges due to non-universal coverage, particularly with smaller community banks and credit unions often having lower coverage percentages.

Choosing the right path for your verification needs

There are a lot of options and providers out there. Consider these important factors to determine which type is best for your business based on your needs.

• Whether an account is valid, open and ACH capable
• Determine legitimacy of the bank account
• Can the bank account be found at the provided institution
• Does the account structure match the account and routing number provided
• Is the account a push only account, or can it be debited?
• Signs of fraud prior to payment processing?
• History of past returns or payment issues?

ValidiFI offers configurable solutions based on your level of validation and risk and friction needed:

• vAccount – confirms the financial institution and verifies whether the account is valid, open, and capable of processing ACH transactions.
• vAccount Plus – unlocks additional insights into the account, such as its history of returns or payment issues, or any past associations with fraud.
• vFraud – examines the account, payment information, and consumer PII, flagging any suspicious details posing a risk for fraud.
• vAuth – utilizes real-time microdeposits to verify the account and authenticate user access.
• vConnect – employs our bank login solution, allowing consumers to log in using their banking credentials to validate account validity, ACH capability, and user access.

Check out the infographic below for more information and contact us to learn more about how our solutions can help.