Penny Drop: A Comprehensive Guide

Everything you need to know about Penny Drop verification in one comprehensive guide.

What is Penny Drop Verification?

Penny Drop is a financial verification process used primarily to confirm the accuracy of bank account details. It involves sending a small amount of money to the account in question, which the account holder must then confirm. 

This method is highly reliable for ensuring that the account details provided are correct and that the account is active.

Why Do We Need a Penny Drop?

Penny Drop is essential for several reasons:

• Accuracy: It verifies the legitimacy of bank account details, reducing errors and fraud.
• Security: Ensures that the account holder is the person providing the details.
• Compliance: Meets regulatory requirements for financial transactions and anti-money laundering (AML) measures.
• User Verification: Confirms that the account is valid and operational before processing larger transactions.

Real-Time Use Cases

Penny Drop is widely used in various scenarios:

• Bank Account Verification: Financial institutions use Penny Drop to confirm account details before setting up direct debits or credits.
• Onboarding Processes: Ensure that new customers’ bank accounts are valid and belong to them. During the onboarding process, banks perform bank account verification to deposit a small amount into the customer’s provided account, for account ownership and validity checks. 
• Payment Gateways: E-commerce platforms implement Penny Drop to ensure accurate payment processing and prevent fraud.
• Fraud Prevention: It helps reduce fraudulent activities by ensuring that the account information provided is valid and correct.

Integration with API Providers.

Integrating Penny Drop involves using APIs provided by third-party services. Here’s a general approach to implementing Penny Drop with API providers:

  1. Choose an API Provider:- 

Select an API provider that offers Penny Drop services. Some popular providers include:

• Signzy: Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium.
• CashFree: Cashfree Payments is expertly designed to cater to the distinct payment requirements of your business. Whether you're looking to gather payments or facilitate prompt on-demand payouts effortlessly, Cashfree Payments is your all-in-one solution.
• TrueLayer: TrueLayer is a global open banking platform. Businesses use our open banking network to access financial data and enable instant payments securely.

2. Set Up Your Account

Create an account and implement a penny drop API with Signzy.

 Sign Up for Signzy: 

• Visit Signzy's website and create an account. They offer various plans to suit your business needs. After connecting with the Signzy team, we can ask for the test environment. 

• So by the test environment, we can explore all the APIs and by testing all the APIs we can make a list of APIs required for our project/business.

• Once registered, you'll receive API keys to connect your application to Signzy's verification services.

3. Integrating Penny Drop API with Signzy.

• The integration of Penny drop API using  Signzy, covering request and response handling.
• When you log in to the Signzy portal, click on the "API Catalog" on the left-hand side. This will display several sections of APIs for different modules.
• If you select Bank, then it will provide an option for Variable Penny Drop. By selecting that, you can get detailed information about the API.
• A "Try out this API" button is on the right-hand side. Clicking on it will allow you to access a sample API.

Below is a sample CURL request for this API:

curl --location 'https://api-preproduction.signzy.app/api/v3/bankaccountverifications/advancedverification' \
 \
--header 'Authorization: <Your access token>' \
 \
--header 'Content-Type: application/json' \
 \
--data \
-raw '{
    "beneficiaryAccount": "00000000000",
    "beneficiaryIFSC": "XXXX0000000",
    "beneficiaryMobile": "00000000000",
    "nameFuzzy": "true",
    "beneficiaryName": "Name",
    "email": "[email protected]"
}'

 As of now from Signzy You will get a sample success response like this:- 

"result": {
  "active": "yes",
  "reason": "success",
  "nameMatch": "no",
  "mobileMatch": "not available",
  "bankTransfer": {
    "response": "Transaction Successful",
    "bankRRN": "000000000000",
    "beneName": "NAME",
    "beneMMID": "",
    "beneMobile": "",
    "beneIFSC": "IFSC0000000"
  }
}

If we encounter any errors, we will receive an error response formatted as follows. 

Error Codes for Failure Response

The failure response for penny drop may include the following error codes, along with their reasons: