What is penny drop verification?

Penny Drop or Bank account verification as is commonly referred to is a way to verify the authenticity of a user’s Bank Account. This is achieved by depositing a small amount (usually a penny and hence the name) – usually INR 1 (one rupee) in the Indian context – which returns the validated bank details along with the beneficiary name.

Penny Drop verification is done for numerous reasons but mostly to verify that the user’s bank account is authentic and that it belongs to the user signing up for the service before transacting on it (e.g. depositing money or receiving money).

Here’s how penny drop works, in the Indian context.

1) Your customer shares their Bank Account Number and IFSC with You (Service Provider);

2) You invoke our Penny Drop function (through our API or through our no-code Dashboard);

3) Our system drops a penny (INR 1) into your customer’s Bank Account;

4) Penny Drop succeeds (if the Bank Account is valid) or fails (if the Bank Account is invalid/closed);

5) A successful penny transaction returns the verified Account Status and Beneficiary Name. A failed transaction returns just the Account Status and the failure reason.

Additionally, once the verification succeeds, you can compare the identity (KYC) details provided in the application form against the beneficiary name returned from the bank to validate the customer beyond doubt.

Talk to us so we can show how penny drop can be done from a cancelled cheque instantly >

Learn how you can identify fraud using Video KYC and Penny Drop >


Is Penny Drop or Bank Verification a regulatory requirement?

In April 2020, SEBI (Securities and Exchange Board of India), that regulates securities and commodities market in India, in its KYC circular has specifically recommended verifying Bank Accounts using penny drop as part of onboarding investors by SEBI regulated intermediaries. On 06 October 2020, PFRDA in its VCIP circular mandated instant bank account verification through penny drop to verify the bank account details of the beneficiary. Therefore, multiple regulatory bodies in India have mandated the safe use of penny drop facility to verify customers.


Where is penny drop services commonly used?

The vast majority of the bank account checks are done by financial institutions and in particular companies lending to businesses and consumers. The lender can verify that the KYC proofs submitted matches with the beneficiary details obtained as part of the penny drop check. Apart from validating that the KYC details belongs to the right user, bank verification can help cut down on fraud and identity theft whereby the loan is taken on synthetic or stolen identity but the bank account belongs to the fraudster trying to defraud the lender. With just a penny drop, large scale losses can be avoided by the lender.

Penny drop checks have found its way into the insurance industry to verify the bank account details of subscribers before premiums are paid on maturity and at the time of claim settlements. Talk to us about how we help the insurance industry to OCR the cheque details and complete penny drop verification in a single non-intrusive step.

Besides, penny drop verification is useful for businesses of all shapes and sizes. For example, an organisation with just a few employees can verify thier Bank account details through a penny drop. This will ensure that the Account holder is the same person employed (you’d be surprised how many aren’t) before beginning to transfer salaries and expenses. Imagine salaries or expenses going to the wrong accounts or failing to be transferred and the resulting stress for both the employer and the employee.

Did you know that bank verification as part of your employee background checks are exorbitantly high? As high as 20 times what we normally charge for a Penny Drop transaction. Next time when you want to verify your employees’ bank accounts, simply sign into our dashboard (no code and no set up or training needed), upload your employee bank account details and have them verified instantly at 1/20th the cost of what background verification companies currently charge.

Learn more about about PAN Verification, Penny Drop and Name Check as part of your KYC >


How do I initiate a penny drop check for my customer?

Let’s take a real-life example. Let’s suppose you want to verify the Bank Account of your prospect before onboarding as a customer.

Step 1:

You will need to request the following details from your User prior to verifying the bank account.

1) The Bank Account Number

2) The IFSC Code

Step 2:

You can use the our dashboard to instantly do a penny verification. This does not require any integration or coding on your part. Once you login, you can simply complete the penny drop verification instantly. Please book a demo today so we can show you exactly how this is done.

As you can note, you can do an individual penny drop check or if you have a number of customers who have submitted their bank account details, you can do a bulk penny drop check. All of the details can be viewed in the dashboard and can be downloaded to your own server once completed.

Talk to us about your penny drop use case >

See how you can use penny drop as part of Video KYC (VCIP/VIPV) >


How can I integrate your APIs within my own Application for penny drop?

If you are interested to integrate our APIs into your own application, you can follow these steps.

Step 1:

Once you have the Account Number and the IFSC Code, you will need to make an API call to our server. Don’t be alarmed, APIs are your friends whereby just a few lines of code in your server (you can use the sample code already available to build yours) and you can complete this in no time.

penny-drop-request

Step 2:

Once an API call is made, it will return a response. The response will usually be in the form of JSON which your Application can now handle. For example, if the Bank Account is valid, it will return the Bank Details, Beneficiary Name and a Success status. If the Bank Account is invalid, it will return an error code along with the reason why it had failed.

penny-drop-response

That’s it. In just a few steps, you will now be able to verify the details of your users before you onboard them. You can go one step further by matching the beneficiary name with the name in PAN or Aadhaar to verify the true identity of the beneficiary.

Did you know that penny drop verification can now be integrated as part of your Video KYC flow. During the video call, you will need to capture a picture of a cancelled cheque. And our technology will make a penny drop API call to extract the account number and IFSC code and complete the verification while you are still on the call. Discover our cutting edge assisted video kyc and unassisted video kyc that can drive 10X growth. You can be a business of any size and onboard customers from anywhere in India. Request for a free trial so you can see for yourself.


How much does penny drop cost?

Penny drop pricing is based on your volumes as they are discounted at large volumes. But rest assured it is extremely low and affordable for anyone wanting to verify bank accounts even at low volumes. We do not charge any set up fee or minimum commitment fees or hidden fees. We do not even ask you for any advance payments as credits. Instead, you will simply pay per transaction and have a post-paid monthly bill. Please talk to us once so we can get to know you better before we share the penny drop pricing and provide you with free access to try our penny drop API.


About

We are your friends at frslabs

FRSLABS is an award-winning research and development company specialising in identity verification and fraud prevention solutions for businesses. We are building the next generation video KYCOCRface verificationidentity verification and IRSF fraud prevention solutions to benefit a billion people.

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