Penny drop verification is a method used to confirm the validity of a beneficiary’s bank account by depositing a specific amount (typically $0.01) into the account. Widely used in India, this process checks not only if the account number is valid but also if it can receive funds.
During the penny drop process, a small sum is sent to the account using the provided bank details, such as the account numbers. If the transaction succeeds, the account is confirmed valid. If the transaction fails, reasons for the failure are provided.
Penny-drop is one of the many checks used by Trustpair. Vendors are asked to send a 1€ payment. If they pay, the account is confirmed valid, and the beneficiary’s name returned can be verified through our account validation system. Trustpair then refunds the vendor.
Penny drop verification is a comprehensive method used to confirm the validity and operational status of a vendor’s bank account, going beyond basic IBAN validators that only checks the format of account numbers. This method is integral to the “Know Your Supplier” (KYS) process, especially when initiating relationships with new vendors. It ensures:
In theory, this means starting a relationship with a new supplier knowing his banking details are valid and he hasn’t been hacked by a fraudster – which happens in the case of vendor fraud.
While penny drop test is a useful tool for verifying bank accounts, it has significant limitations, especially in fraud prevention. This method generally involves one-time verification during the onboarding of a supplier or when changes in vendor credentials are reported. This can’t replace continuous monitoring throughout the payment chain.
Furthermore, waiting for transaction confirmations to verify the beneficiary’s name introduces delays and potential oversights in fast-paced business environments, increasing vulnerability. To enhance verification, some utilize the United Payment Interface (UPI) for instant penny drops, addressing part of the security concern.
However, even with UPI, users are not fully shielded from fraud, such as identity theft where scammers impersonate suppliers or alter banking details directly in your systems.
Trustpair provides an advanced anti-fraud solution that conducts automated, continuous account verifications to ensure vendor details are accurate and secure. Penny drop is used by Trustpair – among other methods -. Our system checks:
This information is delivered to you in real-time, for more efficiency. We offer extensive coverage across the US, Europe, and Asia, allowing for reliable international account validations. Our software also verifies ABA routing numbers, covering various payment methods. Unlike penny-drop used as a standalone, our solution offers immediate bank account verification and blocks any suspicious transfers, ensuring 100% security.
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The penny drop method is a verification process used by businesses to confirm the legitimacy of a customer’s bank account. In this method, a small sum of money, often just a penny, is deposited into the customer’s bank account. The customer is then required to verify the amount received, thereby confirming that the account is active and the details provided are accurate. This method is a part of the Know Your Customer (KYC) process, helping businesses ensure that the bank account details are valid and belong to the user claiming them. It can also be used to verify a vendor’s identity.
This process is facilitated through APIs that automate the transfer of the small sum and the subsequent verification, making it efficient and secure. It helps prevent fraud by ensuring that payments and transactions are directed to the correct recipient’s account. Penny drop is widely used in financial services and other sectors where verifying the ownership of a bank account is crucial for processing payments and transfers. While simple, it plays a critical role in the safety and accuracy of financial transactions.
The penny drop bank account verification method is a common verification process used by businesses to ensure the safety of financial transactions, particularly in verifying bank account ownership as part of the Know Your Customer (KYC) requirements. This method involves sending a small amount of money, usually a penny, to the customer’s bank account and confirming that the transfer is successful. This process helps verify that the account is active and can receive payments, enhancing the security of financial transactions.
Penny drop is generally considered safe as it enables businesses to validate customer account details effectively. However, it’s crucial for companies to use secure APIs to automate and manage these transactions to maintain accuracy and protect customer data. This method also supports a positive user experience by minimizing the interruption to the customer while ensuring the accuracy of critical financial information.
Despite its benefits, penny drop is not foolproof. It primarily verifies account existence and status but can’t fully confirm ownership. Indeed, you confirm that someone has access to the account and can provide information about the random amount received or the code in the description of the payment. Therefore, while penny drop adds a layer of security, businesses should integrate it with other comprehensive anti-fraud measures to safeguard against more sophisticated threats – like using Trustpair as a fraud prevention software.
"Trustpair gives us more reliability and peace of mind. The financial director is more serene when it comes to approving the transfer order."
"With Trustpair’s verification methodology, it's no longer just a consistency check but an exact confirmation of the validity of the third party: there is no longer any risk."
"With Trustpair, we are able to automatically and quickly monitor our third parties and ensure the security of that very data over the long term."
“I would definitely recommend Trustpair to finance departments. It makes adding and modifying beneficiaries more reliable, without resorting to manual processes that are cumbersome, time-consuming and fallible.”
“The control process is simplified with the Trustpair solution, the Finance Department is reassured and, above all, it no longer needs to waste time performing manual checks to verify a supplier's bank details.”
"Trustpair adapts very well to the specifics of our market and our way of working. Several features are developed as we work together. That's a real plus."
"Trustpair has become more than a reflex; it has become an obligation. The team no longer validates an IBAN unless Trustpair has confirmed it to us."
Thanks to Trustpair, we’ve made a significant shift in our security processes and filled the gaps we needed to fill. Trustpair has proved to be a committed and trustful partner and we’ve appreciated the support and transparency.
We’ve gone from manual and time-consuming fraud controls to automated bank account validation done directly in SAP. The workload has been drastically reduced and payment security is now guaranteed.
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