Check verification services provide merchants with recommendations on whether or not they should accept the checks they receive as payment. Check verification services are used to decrease the likelihood of returned checks. It’s an important merchant service because it is impossible to confirm whether or not check writers have sufficient funds to cover checks drawn on their accounts.
Who Uses Check Verification Services?
Businesses with a high volume in sales on low-priced items (such as grocery and convenience stores) often use check verification due to the low risk associated with their transactions.
What is a Check Verification System?
Check verification services use databases that store information on accounts to make a determination. There are four different types of information that a check verification database can house.
What are the four types of information used in check verification?
- Returned Check Database
- Account History Database
- Current Account Status Verification
- Direct (Bank) Verification
Returned Check Database
A returned check database tracks all accounts associated with a returned check that has been processed through the organization’s system.
This type of verification system usually links the check writer to their account using their driver’s license. The returned check database is a powerful system as it identifies checks written by those with a history of frequent check bouncing.
It should be noted that even good checks may sometimes be not recommended if the check writer has a history of bouncing a check. Merchants are free to process checks whether or not it is recommended by the verification service.
Account History Database
A database that tracks account history stores information on the history of checking accounts versus the check-writer. This type of system has records of all the account numbers on checks that don’t clear and can determine whether or not a checking account has bounced checks in the past.
The account history database complements the returned check database by providing information on checks written from accounts not tightly related to an individual (i.e. business accounts).
Current Account Status Verification
Newer check verification systems can confirm the status of the actual bank account in question. Account status verification systems provide the status of the account effective with the start of that business day (as reported by the account’s bank).
Current account status verification analyzes and reports whether there is an open account and if the check is likely to clear. Status messages such as “closed account”, “non-sufficient funds”, “invalid account” or “stop payment” are a part of this verification system.
This system is based on the validity of the account, so there is no certainty that the check will clear when it is recommended for processing. Current account status verification is best for companies that process checks through phone sales, ACH payments, and online sales.
Direct (Bank) Verification
Until the mid-2000s, businesses or merchants were able to call the bank a check originated from and request it be verified. Using the account number, name of the check issuer, check amount, and the check number, the bank would look up the account to verify its validity.
Since then most banks have implemented data security policies to protect privacy, identity, and against fraud, meaning most banks no longer offer direct call-in verifications.
Some banks continue to offer direct verification by limiting the information provided to the caller regarding whether an account is open or has a positive balance. Other banks provide direct verifications for a fee; however, the vast majority do not provide any type of check verification.
Check Verification vs. Check Guarantee
Check verification services will tell users whether or not their check is recommended or not recommended to be processed. A check verification service does not assume the risk of a bad check while a check guarantee services does. Because of the increased protection offered against returned checks, check guarantee vendors charge higher rates.
CrossCheck’s Check Verification
CrossCheck’s Check Verification service has 35 years of proprietary data behind it. Our verification system is used by merchants of all ilks to mitigate the risk of accepting bad checks while keeping processing fees low. Verify and process a check all in one go with CrossCheck Check Verification! Read our free guide below to learn even more.
Tags: Check Verification