How open banking can transform payments and account verification

No more waiting… and waiting for validated accounts and payments as open banking creates a new channel to do the hard work of verification.

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Account verification is the backbone of the payments system. It allows a gym or landlord to use direct debit, or a marketplace to onboard new merchants, confident that there's been no mistakes in entering account data, and reduce fraud by checking a user's name against the account. And yet it remains a tedious and manual process that relies on techniques such as screen scraping or micro-payments to check whether a bank account belongs to the person who says they own it. These options take days and introduce unacceptable data security risks.Payments aren't supposed to be complicated like this – they're just supposed to work. This is where open banking comes in – even though payments are yet to be introduced into the Consumer Data Right (CDR) ecosystem. It streamlines that process via a single, simple API to automatically manage the verification pipeline in seconds, rather than days.But what specific problems is it solving? Consumers can say goodbye to dishonour fees, as merchants can check before taking a payment whether there is money in an account. That reduces delayed payments and the administrative legwork required to chase them up.Account verification that takes seconds allows businesses to virtually eliminate online card fraud, which now accounts for 90% of fraud on Australian cards, and card-not-present scams which hit $418.9 million in 2020, according to the Australian Payments Network.

API-based verification is possible now

An API, like TrueLayer's UK version and upcoming Australian edition, is the modern infrastructure on which open banking operates. It works by allowing our customers to obtain and verify open banking data via a single solution. Today, using our Data API, our customers can match the raw data we deliver against the information they have from their new and existing customers. Our use cases include:
  • Verifying account balances: You can reduce the risk of returned payments and transaction failure by verifying balances and alerting users prior to transactions.
  • Verify account numbers and BSB: Ensure that you have the right BSB and account number for your users and reduce the risk of failed payouts.
  • Verify customers' names: Reduce the risk of fraud by verifying the customer’s name with a bank.
  • Verify income and expenses: Use transaction data to verify customer income and expenses.
And yet this is just the beginning. Our experience in the UK and Europe shows that using open banking to handle verification makes onboarding intuitive and slashes fraud risk, which cuts costs for business and massively improves customer experience. 

The future of verification and payments

Verification will move from simply delivering raw data into our customers' hands to turning it into usable insights. That means building an accurate matching engine that includes systematic data collection, data annotation and other data science resources.Our UK Verification API is an example of what we plan to make possible in Australia: it verifies 90% of good actors in just three clicks, reduces payment fraud, and has instant name-matching logic.The use cases will include:
  • The ability to verify payment set up: Use verified account information to guarantee source and destination of funds. Prevent payments from failing due to user error.
  • Clients will be able to quickly onboard new users: Use real-time data sourced from your user's bank to instantly confirm or challenge account ownership.
  • And they'll also be able to easily onboard new sellers: Verify that funds and payouts are going into the right account, protecting both sellers and shoppers, an increasingly important dynamic as more and more Aussie companies launch their own marketplace platforms to augment their business.
Australia's financial infrastructure is about to radically change and early open banking movers are already gaining an advantage over their rivals. If you're interested in stepping into the open banking light, contact us to find out more. 
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