Businesses using ACH-based transactions for facilitating payments need a reliable and efficient method of connecting and verifying users’ bank accounts within their platform or application.
The most common use of ACH payments are for online bill payments, mortgages, loan repayments and direct deposit of payroll. ACH payments provide a cost-effective alternative to credit cards and paper checks, with low transaction fees and reliable processing times.
Bank verification is required for your customer to initiate a payment to you from the customer’s bank account.
Bank verification checks that the user attaching a bank account owns the account.
Bank verification is a crucial step in the ACH transfer process as it validates that both parties have valid accounts. Without it, participants risk misdirected or insufficient funds, which could result in an ACH return code.
By integrating with the Dwolla Platform and Dwolla’s ACH payment API, your business can quickly and securely send payments to or receive payments from a customer’s bank account.
At Dwolla, we offer three ways for bank verification for ACH transfers within your branded user interface:
- Instant Account Verification
- Third-Party Integration
Whether it’s receiving or sending an ACH transfer, Dwolla’s solution is a cost-effective way to transfer funds.
Micro-deposits are deposits of less than ten cents that verify ownership of a specific bank account.
When using the micro-deposit method for ACH bank account verification, the user will input their routing and account number. The API customer will then initiate micro-deposits which will cause two small credits to go to the customer’s bank.
The small amounts that Dwolla deposits into the identified funding source can be found in the customer’s bank statement in one to three business days and are used to confirm the account belongs to the user.
Validate micro-deposits via the API or the Dwolla Dashboard.
While instant account verification will accommodate a vast majority of the U.S banking population, if a bank does not offer online banking—or the user can’t remember their credentials—this option provides a self-contained bank verification process.
Instant account verification (IAV)
For example, Relay Delivery—a fast growing management and fulfillment platform in the restaurant delivery space—uses Dwolla’s ACH API for bank transfers as a way to replace an outdated and manual payment process that created a productivity black hole with client onboarding and scalability issues.
With only one developer, Relay Delivery integrated with Dwolla’s API for ACH transfers in two weeks and reduced payment processing costs by an estimated $1,200 a month.
“From collecting bank details for every person, to manually disbursing paychecks weekly, it was clear that with our rapid growth that it could not be sustained,” said Zach Ivester, Relay Delivery Integrations Architect. “In implementing Dwolla, we’ve fully automated the sign up and disbursement phases—we’ve freed ourselves to focus on what’s important, our business.”
Dwolla offers a third-party option for bank verification, with only minor differences from Dwolla.js and micro-deposits.
For instance, partnering with Plaid allows customers to quickly and securely verify bank account ownership, without sharing sensitive financial data, like account and routing numbers. Using Plaid, customers authenticate bank account information with their financial institutions—while behind the scenes—a unique token is used to create a funding source via the Dwolla API.
Within this integration, Plaid functions as a vault, protecting the data but allowing distribution of important information to Dwolla, without requiring customers to store it.
The tokens are not long-lived and have an expiration date.
Integrating with Plaid for bank verification allows the customer to access other benefits offered by Plaid such as balance checks and bank statement data.
The ACH Network is a great way for businesses to move money but connecting to it is not simple. Making it easy for customers to integrate, verify their existing bank account and start moving funds is what makes Dwolla not just an onramp to the ACH Network—but a comprehensive partner in moving money.