BNY Mellon Works With Early Warning to Enable Real-Time Account Validation for Real-Time Payments

With real-time payments comes real-time risk, and now banks and their technology vendors are attacking the problem of how to make sure funds moving in the blink of an eye are flowing to the proper accounts. The latest move comes from banking power BNY Mellon, which on Thursday said it is working with Early Warning Services LLC to offer businesses and other banks the ability to verify in real time the status and ownership of accounts before the money moves.

The new service works with a broad range of payments, including wire transfers or automated clearing house transactions, in addition to funds movement through a real-time payments network. BNY said it can be enabled through an application programming interface but also can be accessed via batch-file services or an online user interface. The API will be available with BNY’s Zelle service for real-time disbursements. 

Zelle is a real-time person-to-person payments network from Early Warning that also handles disbursements such as insurance payouts. The new service relies on Early Warning real-time technology that indicates whether an account is open and in good standing and that the payee is either the owner of the account or an authorized signer. 

While the service is “helpful for other payment types too like ACH to help avoid the operational hassles that can arise with sending a transaction to the wrong account and having to deal with the returns,” with “real-time payments, this is critical as there are no returns; transactions are final,” notes Sarah Grotta, director of the debit and alternative products advisory service at the Mercator Advisory Group, Marlborough, Mass., in an email message.

Patricia Hewitt, principal at PG Research & Advisory Services LLC, Savannah, Ga., points to another advantage. “These are designed to be good-funds transactions and authentication protocols that exist today don’t address that as an instream service. Unlike card payments, there’s no standard authorization methodology,” she tells Digital Transactions News.

The real-time validation service represents a new stage in an existing collaboration between BNY and Early Warning. “The extension of this relationship addresses an increasingly important need for clients who are seeking real-time account validation to further reduce the risk of fraud and misdirected payments—which reduces costs and delivers a better user experience for clients,” said Lou Anne Alexander, chief product officer at Scottsdale, Ariz.-based Early Warning, in a news release about the service.

Grotta applauds the service but cautions that users must approach it realistically. “This is a key part of a layered risk-mitigation solution.What this isn’t is a directory that would locate the account details or alias of a recipient or a balance verification,” she says.

Early Warning and The Clearing House Payments Co. LLC, New York City, currently are the only systems offering real-time transfers in the U.S. market, though the Federal Reserve is building a capability called FedNow that is expected to debut in 2023 or 2024. Payments-technology provider ACI Worldwide Inc. and researcher Global Data plc recently forecast real-time payments will reach 4.2 billion by 2024, up from 734 million last year.