Reverse Penny Drop

Reverse penny drop (RPD) provides advanced bank account verification services that use customer-initiated payments to validate account details, confirm ownership, and ensure accounts are active and operational. This verification method gives customers control while providing businesses with instant, reliable verification results without requiring customers to manually enter bank account numbers or IFSC codes. Reverse penny drop is essential for businesses that require secure bank account validation, including financial services, lending platforms, fintech companies, and any platform where preventing account fraud and ensuring regulatory compliance is critical.

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Use cases

The following are key use cases for reverse penny drop verification across regulated financial sectors:

• Banks: Verify bank account ownership for savings, current, and business accounts during customer onboarding. Enable instant account verification for credit services and loan applications. Meet RBI compliance requirements for account validation.
• NBFCs and fintechs: Complete bank account verification for personal loans, credit cards, BNPL services, and digital lending platforms. Support fraud prevention through real-time account ownership validation.
• Investment and wealth management: Verify bank accounts for Demat account opening, mutual fund investments, and trading account setups. Comply with SEBI regulations for investor account verification.
• Insurance companies: Validate bank accounts for policy premium payments and claims processing. Authenticate policyholder bank details for direct settlement processes.

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Why choose Cashfree

The following features help you deliver a reliable, efficient, and user-friendly verification experience:

• Instant verification results: Complete bank account verification within 2-5 minutes compared to traditional methods that take days. Receive real-time confirmation of account ownership and details.
• Customer-controlled process: Enable customers to verify their accounts using any UPI app of their choice without manually entering bank account numbers or IFSC codes. Provide multiple payment options including QR codes and UPI intent links for seamless verification.
• Enhanced security and fraud prevention: Validate active account ownership through customer-initiated payments. Reduce risks associated with fake or dormant bank accounts and minimise chargeback risks.
• Regulatory compliance: Meet RBI guidelines and banking regulations for account verification. Ensure compliance with KYC requirements across financial sectors.
• Seamless integration: Integrate with existing systems using developer-friendly APIs. Support both webhook and polling methods for status monitoring.
• Active account confirmation: Unlike traditional methods that only match IFSC codes, reverse penny drop verifies that accounts are actively receiving payments and operational.
• Cost-effective solution: Eliminate manual verification processes and reduce operational costs. Automatic refund processing within 24-48 hours.

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Verification process

The reverse penny drop verification follows a simple, secure workflow:

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FAQs

What is reverse penny drop verification?

Reverse penny drop verification is a service provided by Cashfree Payments that allows you to verify bank account details by requesting a small transaction of one rupee from the account holder. After successful verification, the amount is refunded to the customer’s account within 48 hours. Users can verify their bank account by launching any UPI app installed on their device.

What are the benefits of using reverse penny drop for businesses?

Enhanced Security: Adds an extra layer of security to the customer verification process. It ensures that the bank account belongs to the user and reduces the risk of fraudulent activities.Reduced Chargebacks: By confirming the authenticity of the bank account, businesses can significantly reduce the likelihood of chargebacks due to unauthorised transactions or incorrect bank details.Compliance: Many industries, especially in finance and fintech, are subject to regulatory requirements that necessitate thorough identity and account verification. Reverse penny drop helps businesses stay compliant with these regulations.Improved User Experience: It simplifies the verification process for users, making it convenient and efficient. Users don’t need to provide extensive documentation, and verification can often be completed within minutes.Cost Savings: By reducing the need for manual verification processes and minimising the risk of fraudulent accounts, businesses can save on operational costs and potential financial losses.

What are the benefits of using reverse penny drop for users?

Quick and Easy Verification: Users can verify their bank accounts without the need for lengthy paperwork or physical visits to a bank branch. It’s a hassle-free process that can be completed online.Increased Trust: Users can have greater confidence in the business they are dealing with, knowing that their bank account details have been verified, which can lead to higher trust levels in the platform or service.Security: Knowing that their bank account is protected against unauthorised access or fraud provides peace of mind to users, making them more comfortable with sharing their banking information.Faster Access to Services: Verified users can access and use services more quickly, as they don’t have to wait for manual verification processes to be completed.Reduced Errors: The penny drop method ensures that the bank account details provided are accurate, reducing the chances of errors in financial transactions.

Can all lines of business use reverse penny drop?

At the moment, Cashfree reverse penny drop verification feature is available only for specific MCC codes:

• 7322: NBFC (debt collecting agencies)
• 6012: Mutual Funds (financial institutions - merchandise and services)
• 6211: Security Brokers/Dealers (merchants that buy, sell, and broker securities, stocks, bonds, commodities, and mutual funds)
• 6300: Insurance Sales, Underwriting, and Premiums

This service isn’t permitted for online gaming and e-commerce industries as per current RBI regulations.

How long is the reverse penny drop link valid?

The reverse penny drop link generated through the API is valid for 10 minutes. You must complete the verification process within this timeframe. If the payment isn’t made within 10 minutes, the link expires and you’ll need to generate a new request.

What information do I receive after successful verification?

After successful verification, you receive:

• Bank account number
• IFSC code
• Virtual Payment Address (VPA) used for the transaction
• Verification status and transaction details

How long does the refund process take?

The ₹1 verification amount is automatically refunded to the customer’s account within 48 hours of successful verification.

What happens if the verification fails?

If the verification fails, the API returns a FAILURE status. Common reasons for failure include:

• Network connectivity issues during payment
• Insufficient balance in the customer’s account
• Payment timeout or cancellation by the user
• Technical issues with the UPI infrastructure

In case of failure, no amount is deducted from the customer’s account.

Can users verify accounts from any bank?

Yes, users can verify accounts from any bank that supports UPI transactions. Since reverse penny drop works through the UPI infrastructure, any bank account linked to UPI can be verified using this method.

Is there a limit on the number of verification attempts?

There’s no specific limit on verification attempts, but each attempt requires generating a new reverse penny drop request through the API. However, we recommend implementing reasonable rate limiting in your application to prevent abuse.

How do I handle the verification status in my application?

The API returns four possible status values:

• CREATED: Request created but payment not yet made
• SUCCESS: Verification completed successfully
• FAILURE: Verification attempt failed
• EXPIRED: Link expired (10 minutes) without payment

Design your application flow to handle these status appropriately and provide clear feedback to users.

What security measures are in place to protect user data?

Cashfree implements multiple security layers:

• All API communications use HTTPS encryption
• Bank account information is transmitted securely through UPI rails
• Data is stored with industry-standard encryption
• Access to verification data is logged and monitored
• Compliance with PCI DSS and other security standards