Open Banking
October 4, 2023
5 min

How to Use Open Banking Powered Account Verification for Consumer Onboarding

Timothy Shin

Open Banking Expert

Consumer onboarding is the process businesses take to help new customers start using their products, services, or platforms. A necessary component of this process is verifying account information and account ownership to ensure compliance with mandatory regulations. Despite being a critical part of the onboarding process, the account verification step is where many merchants lose customers. Lengthy and complicated verification timelines combined with tedious manual data entry deter many consumers from completing their onboarding process.

Open Banking helps remove the arduous and drawn-out steps associated with account verification by directly connecting merchants to consumer bank accounts. This connectivity allows merchants to retrieve and verify information such as account and routing numbers, account names, and more. The result is a more accurate and simplified onboarding process and, therefore, a reduction in user drop-offs. 

The Role of Account Verification in Onboarding and Why Merchants Need It

KYC (Know-Your-Customer) and AML (Anti-Money Laundering) requirements are mandatory for any business with financial transactions. KYC and AML processes require these businesses to retrieve and verify consumer account information to prevent fraud, money laundering, or other illegal activities. Beyond compliance, verifying a bank account helps better guarantee confidence and security in any financial transaction after a consumer is onboarded. 

While account verification is a regulatory requirement, it’s also in the best interest of merchants.  In 2022, the global e-commerce industry lost roughly $41 billion due to fraudulent transactions. One of the most prevalent and expensive forms of fraud was account takeover (ATO) fraud, a type of fraud that happens when a criminal gets access to a legitimate consumer account. 

Current Methods of Account Verification are Outdated

How account verification gets done today is mainly through methods such as microdeposits, credit checks, or sending in bank statements for manual review, which are rapidly becoming outdated. Not only do these verification methods require a minimum of two or three days to complete, barring any revisions or requests for additional documentation, but they’re also vulnerable to human error.

Consider that 29% of businesses state that the main reason for consumer drop-off at onboarding is because the process is lengthy, and 26% state that manual input involved in this process is a root issue in drop-off as well. Roughly half of all consumers surveyed by PwC stated that they would shop elsewhere if it meant a more frictionless experience during onboarding and at checkout. The standard account verification methods currently in place take too long. The fact is consumers now consider frictionless and streamlined onboarding to be the rule and not the exception. 

Open Banking is the solution that provides merchants with an alternative to the current time-consuming verification methods. It abandons slow methods like microdeposits or credit checks entirely. Instead, merchants can connect directly with consumer bank accounts to verify them during onboarding. This process is significantly faster and more accurate, addressing the issue of existing verification methods taking too long and causing consumer drop-offs. 

Improving Consumer Onboarding with Open Banking

Open Banking improves account verification for merchants by streamlining the following steps for account verification:

  1. Obtaining User Consent to Source Relevant Data - All data necessary for verification gets permissioned by the consumer, so full consent is obtained to source data from their bank of choice, allowing for data privacy control, transparency, and trust.
  2. Accessing Financial Data Securely via APIs - Open Banking API connectivity allows for bank-grade data to be sourced directly from the consumer bank account securely and quickly.
  3. Data Validation and Verification - The data is then utilized to validate and verify a consumer to ensure compliance with AML and KYC standards.

With direct bank account connectivity through Open Banking APIs, a frictionless onboarding experience can be achieved. There’s no need for the middleman or antiquated verification processes. All data comes securely with no need for manual entry, and best of all, verification happens in real-time, taking less than a minute.

Reduce Fraud and Increase Accuracy 

As an added bonus, Open Banking makes account verification direct and easy to implement for merchants and simple to follow for consumers. There’s no need to make consumers dig through old paperwork, find bank account and routing numbers, or identify transactions on an account, and no need for merchants to sift through them. All that’s needed is their bank account login credentials, and the API takes care of the rest. 

Open Banking API connectivity also allows account verification to be accurate. As mentioned previously, since there’s no need for manual input or manual review of the submitted data, everything gets verified correctly the first time with virtually no room for any human error during the process, thus speeding up the onboarding process to just seconds compared to the several days it takes with traditional methods. 

Expedite Onboarding with Trustly Connect

Account verification during onboarding is essential to maintain KYC and AML compliance, prevent fraud, and build confidence in financial transactions. To combat the antiquated verification methods currently in place, merchants can leverage Trustly Connect to streamline account verification and eliminate friction during onboarding and checkout. With industry-leading connectivity, Trustly Connect can quickly and reliably pull account information in real-time, effectively reducing churn and modernizing consumer activation. Request a demo today

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