Accounts payable (AP) departments are overworked, often processing countless payments manually. This inefficiency typically leads to fraud and errors, which can cost companies millions of dollars.

By utilizing pre-validation, organizations can verify critical information before payments are sent, reducing fraud and errors while minimizing delays and providing a streamlined experience.

Surging Payments Fraud and Costly Errors

Pre-validating beneficiary information before executing a transaction can severely cut down on fraud. According to the 2024 AFP Payments Fraud and Control Survey, only 5% of corporate practitioners indicated that they do not validate any payment details, down from 17% in 2021.

However, 67% of respondents validate manually, which is a slow and inefficient way of doing so. Fortunately, many respondents indicated that they are considering enhanced validation controls.

“By using API technology and the best available data sources to validate information, payments pre-validation is going to help us put [fraud] in the rearview mirror,” said Jeff Ferguson, CTP, Director of Business Development for Axletree Solutions, during a session at AFP 2024.

And fraud isn’t the only issue. Errors, such as keying in the wrong account number or forgetting to include an invoice number, can result in rejected payments. According to research from 2022, 72% of payment exceptions on the Swift network are the result of formatting errors, account issues and invalid data.

“The cost to handle a single non-straight-through process payment is about $60 to $125 each,” Ferguson said. “That’s pretty substantial.”

Payments Pre-Validation Methods and Tools

The simplest way to pre-validate a payment is to call the beneficiary. However, while you know that you’re legitimate, the beneficiary might not. Additionally, calling every beneficiary manually is a very time-consuming process.

Technology provides much more efficient and effective practices for organizations to pre-validate payments. Quantitative analysis shows that pre-validation tools could address 65% of payments rejected due to errors.

API solutions enable real-time access to bank account details, reducing errors, delays and fraud. Swift’s pre-validation tool allows users to verify if payment data is correct before transactions are initiated. Using APIs, it verifies beneficiary information and ensures that the payment meets the quality criteria required by its target jurisdiction. And the tool uses Swift gpi to track the payment though the entire process.

According to Swift, its pre-validation tool can significantly reduce rejected payments and related costs, cutting non-STP transactions by more than half.

Ferguson also noted that pre-validation also needs to be part of the conversation around real-time/instant payments. “No one is talking about that and we need to because that money is gone once it's out the door,” he said.

This has always been a concern with real-time. Settling payments immediately can open the door to fraud if the money is sent to the wrong place. Pre-validation is essential for real-time, but the challenge is being able to do it fast enough that it doesn't slow down the payment. Otherwise, is the payment truly instant?

In late 2023, Orum, a B2B payments firm based in New York, introduced a pre-validation service that expedites the validation process for the Federal Reserve’s FedNow Service. According to Orum, the service, called Verify, takes only 15 seconds to verify a bank account before sending a payment. Verify is also compatible with The Clearing House’s RTP Network.

In the EU, there is a push to increase instant payments adoption. By October 2025, banks will have to offer a Verification of Payee (VoP) service, which mandates that they check that the IBAN and beneficiary name match before sending a payment. Some countries like France and Italy have already implemented their own pre-validation systems.

Time to Pre-Validate

The benefits of payments pre-validation are clear, and the need is evident. Fraud continues to be an issue that AP departments must contend with. And errors can slow down the entire payments process, ultimately proving to be just as costly as illicit activity. The technology is available now to streamline the process before payments are sent; organizations will likely find that investing in pre-validation will pay for itself in the long run.

The 2025 AFP Payments Fraud and Control Survey, underwritten by Truist, is now live. The survey explores payments fraud trends, how fraud impacts organizations, and the controls being used to curb fraud. U.S.-based corporate practitioners have until February 7 to complete the survey.