What is a Bank Statement Analysis?

Bank statement analysis is an organized process used by individuals, businesses, and financial institutions to review and analyze bank statements, transaction records, and closing balances in a bank statement.

Lending businesses use bank statement analysis to assess applicants’ creditworthiness, detect default risks, and make informed loan decisions. By analyzing statements, lenders gain insights into applicants’ financial behavior, income sources, spending habits, and overall financial health, which are crucial data for evaluating their ability to repay loans.

Why is Bank Statement Analysis Important?

Lending businesses and companies need bank statement analysis for the following reasons:

Underwriting

This assesses financial health and the risk of lending money to an applicant. By doing income verification and analyzing bank statements, lenders can determine if the applicant is financially stable and capable of repaying the loan.

Prevent Financial Fraud

Bank statement analysis helps identify any unusual or suspicious transactions, funds, or activities in the account, which could indicate potential fraud or ghost loan risk. This allows lenders to take necessary precautions to mitigate such risks.

Fraud detection

Loan Approvals

By reviewing bank statements, lenders can make informed decisions regarding loan applications. They consider factors such as data accuracy as the applicant’s income, expenses, and financial history to determine whether to approve or deny the loan.

Income Tax Purposes

Bank statements provide valuable information for tax assessment and verification. Lenders can verify an applicant’s income, expenses, and financial transactions to ensure accurate tax reporting.

How to Conduct Bank Statement Analysis?

Bank statement analysis can seem tedious, but it’s essential for anyone wanting to manage their finances better. Whether you’re a business owner, accountant, or just curious about your financial situation, our guide breaks down the process into simple steps:

Gather necessary information

Before performing the bank statement analysis, make sure you gather all relevant bank statements. These may include monthly paper statements, electronic records, or any other financial documents that offer context to the transactions. Having these on hand will ensure a comprehensive examination.

Read more: What is enhanced due diligence?

Extracting information from bank statements

If your bank statements are in paper format, consider digitizing them to make analysis easier. Extracting relevant information from the bank account statements from PDF or scanned formats using OCR technology essential to streamline bank statement analysis.

This conversion allows effortless, data extraction, manipulation, sorting, and integration with account numbers into diverse analysis platforms, thereby improving accuracy and efficiency in the analysis process.

Identify and categorize transactions

Begin by thoroughly your financial standing by reviewing each transaction listed in the statements and categorizing them according to their nature. Common categories include income, expenses, transfers, and other relevant classifications. This step is key in gaining clarity on the sources and goals of your finances. Once categorized, you’ll have a clearer picture of your financial and effective cash flow management, facilitating effective budgeting and strategic financial planning.

Spot unusual or unauthorized transactions

One of the main reasons for analyzing statements is to spot anything unusual.

Pay attention to transactions that don’t seem right, like payments to unfamiliar businesses, big amounts, frequent expenses, lots of small transfers, or payment entries you don’t recognize. These could signal possible fraud, someone accessing your account without permission, or mistakes that need checking.

How does bank statement analysis API work?

The Bank Statement Analysis API functions as a comprehensive tool for processing and a bank statement analyzer extracting insights from bank statements.

The API accepts various inputs to accommodate different user needs and preferences:

  • Password-Protected and Non-Password-Protected PDFs: Users can submit bank statements in PDF format, whether they are password-protected or not.
  • PDF Upload: Users have the option to directly upload PDF statements through the API interface.
  • Base64 String: Bank statements encoded as Base64 strings can also be submitted for processing. This format enables seamless integration with other systems and platforms.
bank statement analysis API

Upon processing the input statements, the API generates detailed outputs to provide valuable insights:

  • Date Range of Statement: The API extracts and presents the date range covered by the bank statement. This information helps users understand the timeframe of their financial transactions.
  • List of Transactions: Users receive a comprehensive list of transactions recorded within the specified statement period. Each transaction entry includes essential details such as the transaction date, description, amount, and transaction type (e.g., bank deposits, withdrawal, transfer).
  • Statement Validity Result: The API assesses the overall validity of the bank statement, determining whether it meets the required standards and formatting criteria. This validation assures the integrity and reliability of the financial data analyzed.
  • Transaction Validity Result: In addition to assessing the statement as a whole, the API evaluates the validity of individual transactions. It identifies any dissimilarities or potential errors detected during the analysis process. This feature helps users promptly identify and address any issues or anomalies in their financial records.

Hyperverge’s bank statement analysis API

HyperVerge’s Bank Statement Analysis API simplifies the process of analyzing bank account statements, providing users with insights and actionable insights to support financial decision-making, cash flow management, fraud detection, and compliance efforts.

Key Features of HyperVerge’s bank statement analysis API:

Fraud Prevention: Verify payment histories, account balances, spending patterns, hygiene, liabilities, and more to prevent fraudulent activities.

Simple Onboarding Journeys: Simplify the user onboarding process with minimal and easy inputs, enhancing user experience.

Reduced Manual Hours: Automate the verification process with software solutions, reducing the need for manual intervention and improving efficiency.

Smart Auto-filling: Fetch relevant user data and auto-populate forms, streamlining the user experience and saving time.

Our Bank Statement Analysis API aims to provide a complete solution for processing bank account statements, offering advanced fraud prevention measures, simplified onboarding journeys, automation of manual tasks, and smart auto-filling capabilities to enhance user experience and operational efficiency further.

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