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Microdeposits

Overview

Microdeposits are small test transactions, usually under $1, sent to a bank account to verify ownership and validity. Customers confirm the amounts received, proving they control the account. This method is commonly used in the US and other regions without real-time account verification. While reliable, it can take several days, creating delays in onboarding.

Financial institutions, payroll providers, and fintechs use microdeposits to reduce fraud and ensure funds are linked to the correct account. Regulators view them as a secure though slower method for account verification. With instant account verification (IAV) gaining traction, microdeposits are increasingly a fallback method where APIs are unavailable.

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Related Terms

Instant Account Verification (IAV)

Bank Account Verification

Penny Drop Verification (India)

FAQ

What are microdeposits?

Small test transfers sent to verify bank account ownership.

Why are they used?

They provide a reliable way to confirm account validity.

Who uses them?

Banks, payroll processors, and fintechs.

What is the drawback?

They take longer compared to real-time verification methods.