Accounts payable (AP) leaders are on the front lines of the fight against payment fraud.  Business Email Compromise (BEC), vendor impersonation, and account takeovers are growing more sophisticated, putting AP teams at constant risk. According to the latest AFP Payments Fraud and Control Survey, 71% of organisations have experienced attempted or actual payments fraud​.

One of the most common fraud tactics involves criminals infiltrating supplier relationships, either by compromising vendor email accounts or posing as legitimate suppliers to request fraudulent changes to bank account details.  Without proper verification, AP teams risk processing payments into fraudulent accounts, resulting in financial losses that are often difficult, if not impossible, to recover.

At the same time, verifying the ownership of supplier bank accounts is a complex and time-consuming process that’s prone to error.  Traditional methods, such as calling suppliers or requiring voided checks, slow down onboarding, create compliance risks, and introduce inefficiencies.

Automated Bank Account Ownership Verification solutions provide AP leaders with a smarter, faster, and more secure way to verify the details of domestic and international bank accounts before payments are issued.  By leveraging real-time data from trusted sources, these solutions eliminate the risks associated with manual verification and significantly improve supplier onboarding efficiency.

This article shows you how.

Understanding the supplier onboarding process

Supplier onboarding is a crucial function of AP, ensuring that new vendors are properly vetted and set up in the system before payments are issued.  The supplier onboarding process typically includes:

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• Collecting supplier information.  During the onboarding process, AP teams must gather essential information about the supplier, including company name, tax identification number (TIN), physical address, contact details, and banking information.  This data serves as the foundation for ensuring accurate payment processing and regulatory compliance.
• Verifying the accuracy of supplier details.  To mitigate fraud and compliance risks, AP teams must validate the accuracy of the supplier’s information before approving payments.  This includes confirming that the business is legitimate, ensuring tax ID details match government records, and verifying that the provided bank account belongs to the supplier.
• Entering supplier information into a system of record.  Once verified, supplier details must be entered into the buyer’s enterprise resource planning (ERP) platform or other system of record.  Manual data entry introduces the risk of human errors, such as mistyped bank account numbers or mismatched supplier names, which can lead to payment failures or fraud.
• Approving and activating the supplier for payment.  Before payments can be made, the supplier’s bank details must be reviewed and approved.  Many AP teams rely on outdated processes, such as calling suppliers to confirm banking details, waiting for prenotes or penny tests, or relying on email – methods that are prone to fraud, error, and inefficiencies.

Without a secure and efficient onboarding process, AP teams risk delays, costly errors, and opening the door to fraudsters – turning what should be a routine task into a financial and operational liability.

Challenges with traditional supplier onboarding methods

Despite its importance, supplier onboarding remains one of the most inefficient and fraud-prone processes in AP due to reliance on outdated methods.  Some of the key challenges include:

• Manual verification processes.  Many organisations still rely on time-consuming, manual methods to verify supplier bank details, such as calling vendors, requesting paper-based documentation, or manually entering data into ERP systems.  These processes not only slow down onboarding but also introduce human error and inefficiencies that can delay payments.
• Security risks from email-based data collection.  In many AP departments, supplier banking details are collected via email.  However, email is highly susceptible to cyber threats such as phishing, spoofing, and BEC.  Fraudsters pose as suppliers, requesting changes to banking details, making it easy for AP teams to unknowingly send payments to fraudulent accounts.
• Fraud vulnerability from vendor impersonation.  Fraudsters use social engineering tactics to impersonate suppliers and convince AP teams to update payment instructions.  Without an automated bank account ownership verification process, AP teams may struggle to detect fraudulent account change requests, increasing the risk of payments being sent to bad actors.
• Delayed payment processing.  Traditional bank account verification methods, such as prenotes and penny tests, require suppliers to wait days or even weeks before receiving payments.  This creates cash flow issues for vendors and strains business relationships.

It’s for these reasons that more organisations are automating their supplier onboarding process with self-service supplier portals that include automated bank account ownership verification.

What Is automated bank account ownership verification?

Automated Bank Account Ownership Verification solutions instantly validate supplier bank details, reducing the need for manual verification and mitigating fraud risk.  These solutions work by:

• Authenticating the bank account owner.  Automated solutions check whether the name associated with a domestic or international bank account matches the supplier’s legal business name, and other details, reducing the risk of fraudulent account changes.
• Verifying key bank details.  Automated solutions validate critical account details such as:
• • Account holder’s name: Ensures the account is registered with the correct supplier.
  • Street address, city, state, and ZIP code: Confirms legitimacy and compliance with regulatory requirements.
  • Bank account number and routing number: Verifies the payment destination.
  • Tax Identification Number (TIN): Ensures alignment with tax records.
• Confirming the account Is open and in good standing.  Before issuing payments, automated bank account ownership verification solutions check whether the account is active and can receive payments, eliminating the need for prenotes or penny tests.
• Pre-validating ACH, wire, and real-time payments.  Instead of waiting days for manual verification, automated bank account ownership verification systems instantly check the account’s validity for different payment types, ensuring funds are transferred securely.
• Providing real-time verification results.  Organisations receive instant verification feedback, allowing AP teams to approve supplier payments with confidence instead of waiting for manual confirmations.  Delays can potentially disrupt a buyer’s operations.

These capabilities deliver significant benefits to organisations of all sizes.

Benefits of automated bank account ownership verification

For AP leaders seeking strengthened security, increased efficiency, and enhanced regulatory compliance, automated bank account ownership verification offers several key benefits:

1. Payment fraud mitigation.  Automated bank account verification detects mismatched or suspicious bank details before a payment is issued.  AP teams are alerted in real time of anomalies that may indicate fraud, allowing them to act fast.  As a result, organisations can prevent unauthorised account changes and stop fraudulent transactions before they occur.
2. Faster supplier onboarding.  Automation eliminates the need for manual bank account ownership verification, reducing onboarding time from days to minutes.  Suppliers can receive payments faster, improving vendor relationships and business efficiency.
3. Increased accuracy and compliance.  Automated bank account verification reduces errors associated with manual data entry and ensures compliance with regulatory and internal fraud prevention policies.  It also provides a clear audit trail for AP teams and compliance officers.
4. Pre-validation of payments.  Organisations can use automated bank account verification solutions to pre-validate ACH, wire transfers, and real-time payments, reducing payment failures and rejected transactions.  By pre-validating payments to suppliers, organisations can avoid costly payment errors and unnecessary rework, improving cash flow predictability.
5. Reduced administrative burden.  With an automated bank account verification solution, AP teams save countless hours by eliminating manual verification steps.  Staff can focus on higher-value tasks, such as analysing spending and optimising supplier relationships.
6. Real-time insights and alerts.  Instead of waiting days for verification, automation provides AP teams with instant, actionable insights into bank account status and ownership.  Early warnings prevent unauthorized payments and reduce financial exposure to fraud risks.

By automating bank account ownership verification, AP teams can fortify fraud defences, accelerate processes, and help ensure every payment is secure – protecting their organisation’s bottom line.

Take control of your supplier onboarding process

With payment fraud threats evolving rapidly, traditional verification methods are no longer sufficient.  AP leaders must embrace automated solutions to protect their organisations, streamline supplier onboarding, and ensure secure payments.  Self-service supplier portals with automated bank account verification can help organisations streamline supplier onboarding and reduce fraud risk.

Phil Binkow, CEO of VendorInfo