Verification Without the Hassle: Penny-Less and Problem-Free
What is Penny-less Verification ?
Penny-less verification allows the users to be authenticated for onboarding using simply their IFSC code and bank account number. For verification, no money is transferred to the end user's account. When a user inputs their bank account number and IFSC code, the bank's data is retrieved using that number and returned to your system, which can use it to confirm the account holder.
Why is it needed ?
Penny-less verification eliminates the need for any money transfer, reducing these risks and making the verification process more secure.
Confusion for recipient:
The recipient might be confused about the random, small deposit in their account, especially if they weren't expecting it. This can lead to them contacting their bank or ignoring the deposit altogether, causing delays in verification.
Risk of tampering:
In the window between sending the test deposit and verifying it, there's a slight risk that someone could gain unauthorized access to the account and remove the deposit before verification is complete. This could potentially allow a fraudulent user to pass verification.
Data breaches:
If the system storing the account information used for verification is compromised in a data breach, hackers could potentially use the deposited funds for fraudulent purposes.
Penny-less verification process
Step 1: User Initiates Verification:
The user starts the process by entering their bank account information. This typically involves providing their account number and routing code (or the equivalent details depending on their location). By entering this information, they initiate the verification process.
Step 2: System Validates Information:
Once the user submits their details, the system takes over to validate the information. This validation can involve several checks happening behind the scenes. The system might:
Contact the Bank: Directly contact the user's bank to confirm if the provided account number is real and currently active.
Check Formatting: Validate the account number and routing code themselves, ensuring they follow the correct format and structure specific to the region.
Advanced Techniques: In some cases, the system might utilize more sophisticated methods like real-time account verification services offered by banks or third-party providers.
Step 3: System Returns Status:
After all the validations are complete, the system returns a status update on the user's account. This typically indicates whether the account is valid and active. Depending on the specific verification service used, it might also provide additional information like the account holder's name. Throughout this entire process, no actual transfer of funds takes place.
Where is it used ?
FinTech Applications:
Financial technology applications, including mobile wallets, peer-to-peer (P2P) payment platforms, and online banking services, heavily rely on penny-less verification for user onboarding and account verification processes. This ensures users own the linked bank accounts, streamlining financial transactions.
E-commerce Platforms:
Many e-commerce platforms, especially those offering features like instant refunds or post-purchase payment options, leverage penny-less verification. This helps verify the user's linked bank account for secure and seamless transactions.
Sharing Economy Services:
Platforms in the sharing economy, such as car rentals or home-sharing services, often require verification of a user's financial capability. Penny-less verification allows them to confirm a user's bank account details without the need for traditional deposit methods.
Subscription Services:
Subscription services, particularly those with recurring payments, can benefit from penny-less verification during sign up. This confirms the user has a valid bank account linked, reducing the risk of failed payments due to invalid account information.
Freelancing Platforms:
Freelancing platforms that facilitate online payments between freelancers and clients can utilize penny-less verification. This ensures the freelancer has a valid bank account to receive payments for their services.
