Banks need to share more check fraud data

Register now

Every year, consumers expect faster, simpler and more on-demand check deposit options. And while financial institutions continue to offer more friction-free options, fraud prevention measures around this age-old payment method continue to fall short.

As banking has changed, so too have check deposits – and with them, check fraud tactics.

The shift from person-to-person deposits to digital options – including mobile, ATMs and RDC – has created new challenges to fraud prevention efforts. In addition, today’s check fraud schemes include the use of high-quality check stock, printing and scanning technology, adding to the need for a data-driven method for check validation.

In an alarming new study published by the American Bankers Association, “total attempted check fraud increased to $15.1 billion [in 2018] and accounted for 60% of attempted fraud against deposit accounts.”

One of the main culprits for fraud’s eventual success is weak or outdated fraud data.

Whether presented at the teller line or through digital channels, the best way to prevent fraud is by triangulating items in real time against a robust fraud database. To strengthen the database, fraud data needs to be contributed in return.

Contributions act as a force multiplier – it eliminates the chances of getting hit twice by the same scam, for example, and serves to clean up the check ecosystem on the whole.

Why aren't FIs contributing? This remains a mystery.

Losses resulting from check fraud can often be recuperated, but usually at the expense of others. For example, if a check is fraudulent or returned as non-sufficient funds (NSF), FIs can recuperate the resulting fees from its customers. FIs can also recuperate losses from insurance reimbursements on fraudulent claims.

While a reliance on these tactics can help stem losses to the bottom line, they’re short-sighted.

Long term, FIs can experience serious, large-ticket losses, as well as reputational damage, as a result of accepting fraudulent checks.

For reprint and licensing requests for this article, click here.
Checking Payment processing Payment fraud ISO and agent