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External Account Verification

All external accounts in Modern Treasury have an attribute called verification_status. This attribute tracks whether the external account's banking information has been verified through the Modern Treasury platform. There are three possible states that this can be in: unverified, pending_verification, or verified. All API responses and webhook payloads will include this field.


State Diagram for External Account Verification

The verification status of an external account has no impact on your ability to use the account for payment orders. It is purely for informational purposes so that you can track whether an account has been verified through Modern Treasury. This is different than what you might be familiar with from other platforms, where some form of verification is required prior to initiating payments.

By default, all external accounts are unverified. If you do not plan to use our platform's verification tools, the accounts will remain unverified. You may choose to do this if you handle verification in your own platform and do not want to use our tools.

If you do want to use our verification tools, there are currently two ways that we support verifying external accounts.

Microdeposit Verification

Microdeposit verification is a way to verify bank accounts by testing small payments to the account. Modern Treasury will send two payments that are under $1 to the account. The counterparty can verify that they own the account by passing back the amounts that were deposited to them.

The benefit of microdeposits is that they work with any bank account. All you need is an account and routing number to send funds to someone.

The disadvantage is that it will take 1-2 days until the counterparty can view the microdeposits and verify their account, and then another 1-2 days to recoup the deposits.

Instant Verification with Plaid

Instant verification is a way to verify ownership of a bank account through a secure digital channel. We currently support Plaid as a partner to offer instant verification to our customers.

There are two benefits to this approach. One is that it's instant. Once the connection has been made and the account information has been pulled, the external account will be verified. The other benefit is that you can pass a tokenized string to Modern Treasury when creating the counterparty, rather than their bank account details. This allows you to not pass banking information through your infrastructure.

The disadvantage is that this approach requires your user to grant access to their bank account, which some users may be reluctant to do. And some banks may not support Plaid, in which case you will be unable to connect to their accounts.

What’s Next

Read more about how to verify an external account