Bank Verification – Explained
Bank Verification is a technology that allows you to connect your financial accounts and share their data with a requesting company. Examples include Plaid and DecisionLogic.
After you have signed contracts to secure funding, the next step is a “bank verification” with Plaid or DecisionLogic. If you are wondering what this means, you have come to the right place.
Use Cases for Bank Verification Service
Bank Verification has a variety of use cases including:
- Account ownership verification
- Deposit verification
- Month-to-date cash flow reports
- Ledger information
- Confirming sufficient funds for future payments
Are Bank Verification Services Safe?
When you link your bank account to the funder’s bank verification software, your information is 100% safe.
Here’s is how they keep it safe:
- Secure Personnel: Background checks and confidentiality agreements for all employees and contractors, along with regular security training.
- Secure Development: All development projects follow secure lifecycle principles and align with OWASP Top 10 recommendations.
- Secure Testing: Regular third-party penetration testing and vulnerability scanning, with both static and dynamic software security testing.
- Cloud Security: Customer data is isolated, encrypted at rest and in transit, and continuously monitored. Complies with SOC-2 standards.
- Compliance: Regularly assessed and validated security practices, with a responsible disclosure policy for identifying and resolving vulnerabilities.
By implementing these measures, Plaid and Decision Logic ensures your financial data is securely managed and protected.
How a Bank Verification Service Works
The Bank Verification software is integrated into eligible apps and doesn’t require you to create a separate account.
The connection process typically includes:
- Selecting or searching for your financial institution.
- Entering username and password information to authenticate financial accounts.
- Authenticating information for security purposes.
- Selecting the financial accounts you want to connect.
- Completing the connection to the desired app or service.
When you enter your username and password, DecisionLogic and Plaid set up a direct integration to your financial institution. Direct integrations mean that when you enter your bank credentials, Plaid never even sees them – credentials are sent directly to your bank. Your bank verifies it’s you and gives Plaid permission to access certain components of your account. Consumers are not charged for this service; the app requiring the financial data pays the fee.
Over 20,000 financial institutions use bank verification for millions of clients. However, not all accounts are eligible for connection, and some financial institutions may not yet support or allow third-party connections.
Examples of institutions using a Bank Verification Service
- Clear Skies Capital: Certain products and pre-approval types require our customers to link their business bank account through either Plaid or DecisionLogic during the funding process to validate and provide a comprehensive view of your business finances.
- Certain funders can use a PDF of the month to date activity report instead of an electronic bank verification.
- Venmo: For peer-to-peer payments and money transfers, Venmo requires you to verify a bank account through a Bank Verification Service by entering your online banking credentials.
- Chime: By providing login credentials to an eligible external bank account, you can use Bank Verification Service to fund your Chime bank account.
- Robinhood: Plaid allows Robinhood, a popular stock trading and investing app, to collect only the necessary banking information to safely transfer funds directly from your bank account when you invest.
Conclusion
If a lender like Clear Skies Capital is requesting a Bank Verification, you don’t need to create a new account or pay for the service. Simply follow the prompted instructions in the app you’re using—such as entering your bank account credentials—and Bank Verification Service can link and share your financial information to get to the next step in the funding process.