The efficiency of an automated payments process is reliant on the input of accurate data. Data validation is the only way to ensure that the information captured is accurate. Without account validation, most organisations experience a data entry error rate of between 2% and 8%.
The weakest link in any automated payment process is at the point where the payment details are manually entered into the organisation’s accounting, billing or payment system. If data validation does not take place at this time, the subsequent administration cost of resolving the error at a later stage can be significant.
Such errors occur either as a result of being provided with incorrect information in the first place or due to errors introduced at the point of data entry. It only takes one digit to be incorrect for the payment to fail which is why data validation is so important.
Data validation isn’t easy
In addition to the well-known problems associated with data entry, processing bank details can compound this further:
- Identification of account numbers is not always straightforward
Although the correct information from can be found on a cheque book or bank statement, customers usually use the information printed on their payment card.
- The data required to undertake bank account validation is constantly changing
New bank branches, co-operatives, credit unions and savings society branches are regularly opened, whilst others are closed or merged.
- Many account numbers and bank codes require reformatting
A significant number of account numbers and sort codes must be converted from the format in which they are issued to the Payer into a required recognised format for processing.
- Customers are increasingly entering their own details
The adoption of electronic commerce has led to a rapid increase in Internet and automated telephone systems to capture customer payment details, which significantly increases the chance of errors.
Data validation at the point of entry highlights erroneous data prior to processing, virtually eliminating the chance of submitting invalid payment data which can have a direct impact on the time and administration costs. Although many organisations have implemented data validation systems for checking the accuracy of payment data - usually developed in-house - these tend to rely on limited supplies of data and must be regularly updated.
Data validation solutions
Data validation using Modulus checking
Modulus Checking is a data validation procedure that applies a mathematical algorithm to an account number (or an account number and sort code combination) to check that it is valid for a particular range of sort codes. In the absence of an entire database of every bank account, it is the next best form of data validation to check the validity of an account number. However, Modulus checking is only one aspect of data validation.
Data validation using Bank code directories
Bank code directories are available from banks, publishers and financial institutions, but provide data only. In order for bank code directories to have real value as data validation tools and undertake the other important aspects of validation - modulus checking and Transposing - the data must be coded into the relevant software application.
Data validation through transposition
A significant number of account numbers and sort codes must be transposed from the form in which they are issued to the payer into the form required by an Automated Clearing House for processing. This form of data validation must take place prior to modulus checking.