A preliminary notification is a zero-dollar electronic fund transfer used to verify account information before initiating actual direct deposits. This transaction confirms that the provided bank account number, routing number, and account type are valid and can receive electronic payments. For example, before an employer begins paying an employee via direct deposit, it will often send this notification to ensure the employee’s bank account is correctly configured to receive funds.
The use of this preliminary step minimizes the risk of failed direct deposits and the associated complications and costs. By validating the account details in advance, businesses and payroll departments can significantly reduce errors, such as payments being rejected or misdirected. Historically, this practice has been crucial in establishing trust and reliability within the electronic payment ecosystem, contributing to the widespread adoption of direct deposit as a preferred method of payment.
