The State of Check Fraud in 2026: Benchmark Survey Report Insights, Risks, and What Financial Institutions Should Do Next

Hello, and thank you all for joining us today. My name is Kara Talcott. I am the marketing communications coordinator here at Alligent. In today's webinar, we will walk through key insights from our benchmark check fraud survey, including where fraud attempts are increasing across deposit channels and which mitigation strategies institutions are prioritizing for the year ahead. Joining us today are Doug Hendrix and Alfred Givens, two product experts from our payments team. If any questions come up during the webinar, please feel free to type them into the chat box. We'll have a designated Q and A segment at the end to answer any of those questions. And with that, I'm gonna hand things off to them. All right. Thank you, Cara. Thank you, everyone, for attending today. Just want to go through a quick, you know, just to provide some information as to objective of this session here today. So one of the biggest things that we know as we talk about, you know, fraud in the financial financial services space is that we want to equip financial institutions like yourselves with deeper insight into escalate the escalating check fraud trends. And we want to and and in doing that, to strengthen your ability to modernize the check processing and deposit automation workflows, which includes image capture, validation, endorsement verification, duplicate detection, and exception handling through workflow modules that we have and and are available as part of our unified solution. And we do this all to reduce your fraud exposure, to improve your operational efficiency, and to ensure that we safeguard the trust of your depositors. We have heard many or seen many presentations related to the overall decrease in check volumes, but checks are still the most trusted and efficient means of paying for goods and services. Here at Allergent, we want to be at the forefront of this as one of our objectives is to ensure that the last check written in the US, Canada, and UK is captured and processed on an allergen solution. We have developed this robust, modern, and effective solution because our customers and their reputation is important to us. And, you know, as part of that, we know that the ability to to ability to detect and mitigate fraud is a very important and critical component that applies to all areas of DFI. As it relates to who we are at Alligent, we're a leader in the transaction processing ecosystem. We offer technology and and that digitizes and automates workflows across the full life cycle of a financial transaction. We focus heavily on the check payment processing, which includes image capture, data extraction, fraud detection, and enterprise wide routing. Some of the things that we do, I just wanna, you know, just to hone in on a couple of them. Deposit automation and check processing is that we provide the software that electronically captures, processes, and analyzes the check images and data across branch, mobile, ATM, remote channels to name a few in terms of the channels that we support. This includes tools and and that help the institutions reduce manual work. And as part of that, also improving accuracy and to accelerate the clearing process. For fraud detection, the solution includes integrated fraud mitigation tools designed to identify suspicious items during deposit processing. That and and the means of doing that is that we want to help the institutions to reduce losses from check fraud overall. And then on the topic of fraud losses, we detect and provide functionalities to take to take action on suspect items at the point of capture. Because the further in the workflow that these are detected and flagged for action, the more expensive it becomes for the FI. As an example, a check worth a thousand dollars that is deemed fraudulent but caught late in the workflow, say, after the deposit account is updated with the deposit, can result in cost to verify that it that is as much as five times the value of that check. We also do enterprise content and information management where we support document digitization and workflow automation, which enables institutions to manage sensitive information securely and efficiently. So our technology is widely used because it helps financial institutions to reduce operational cost, improve processing speed and accuracy, strengthen fraud defenses, modernize your legacy check processing systems, and enhance your overall customer experience across digital and in branch channel. We've also been awarded with a couple we've been the recipients of a cup few awards in different categories. For employee recognition, leadership, and and our organizational values, we have been we have been winners or or awarded the top workplaces in twenty twenty four and twenty twenty five. And in innovation, fraud mitigation, operational efficiency, we have been finalists and winners of the PayTech and BankingTech Awards, where Unifi was recognized as the best PayTech solution for banks and credit unions, as well as the best consumer payment solution. And all this speaks volumes to our main objective of helping FIs of all sizes to keep fraud occurrences to the absolute minimum while helping the operation teams and others to concentrate on building lasting and fulfilling relationships with each depositor, account holder, member, or customer. Doug? Alright. So, you know, now that we've kinda walked through a little bit about Allogene and who we are and how we approach things, you know, I think the the next kinda step is to really kinda look at the rising fraud threats in twenty twenty six, go through some of the survey results, and, you know, really take the chance and opportunity to address what we know is a challenging landscape. But as challenging as it is, you know, there are options and solutions available out there to support, you know, your banking needs and fraud prevention and risk mitigation. Right? So check fraud is still a persistent challenge. We know that, you know, that hasn't changed. The advance of digital channels beyond the branch and brick and mortar only brought, you know, technology to the front door for fraudsters. The sophisticated fraud tactics. You have to have solutions that play in the technology space because that's where we know the fraudsters are playing to exploit, you know, channels that aren't in person and, you know, don't have a physical connection point for a transaction to be processed. The multilayered check fraud mitigation world is critical. You can't just come from one landscape of, you know, doing a historical, you know, custom lookup against what you know. You know, you have to truly look at micro lines and dollar amounts and what's been known and what's been reported along with the actual check itself. Three points of review across all channels is just an element that allows a great baseline for configuration and business rules to support the goal of identifying that item and potentially throwing enough flags that it gets to review, potentially gets to be held and, you know, again, doesn't get processed with, you know, the funds moving out before they can be prevented at. Targeted data validation at each review, you know, is a real time element that gets back to that day zero component. You know, you got to be able to get out ahead of it and not wait for it to come around, you know, three to four days after the fact. So, you know, we know what happened in twenty twenty five, very similar aspects to twenty twenty four and twenty twenty six. You know, there are no indicators that anything is actually going to change as, you know, as much as, you know, that would be nice. The real indicators are that there will be additional check fraud and additional versions of it coming out this year. So check fraud year over year from twenty twenty four to twenty twenty five, you can see increased by more than twenty five percent. You know, when you look at the numbers, I mean, they they speak for themselves. Some say it stayed about the same. Some say it's not sure. Some institutions, it increased by less than ten percent. But, you know, at the end of the day, the fact that, you know, the top three along with the not sure category, you know, that's just a landscape that shows why it's important to, you know, participate and work with products like UniFi and, you know, Alligent to get out and, you know, put your check fraud prevention and mitigation platforms in place for twenty twenty six. Right? Everything is different than it used to be. Some are physical items, some are digital items, you know, ATMs and ITMs versus coming through a mobile deposit. All of these elements are in play for the fraudsters and, you know, expect to see the same increases, you know, over the course of twenty twenty six if, you know, you're not adding these additional multilayered approaches, if you're not treating check fraud, you know, with twenty twenty six type digital solutions. You know, these numbers show that they're they're not gonna they're not gonna change and go down. So here we have a quick poll question. Does your check fraud solution cover every deposit channel? And this is just really a landscape that we we know within our UniFi platform. We understand it to be very important because the tech fraud is occurring across all channels. It's happening at the teller lines. It's happening at mobile. It's happening with, you know, remote deposit capture systems, ATM, ITMs. And with Unifi, you get the luxury of having that all in one space. So, you know, important to make sure, again, that your platform is up to the challenge for today given, you know, the extension of what deposit channels have grown to to become. So when we look at check fraud by channels, you know, where we're seeing it the most, mobile deposit far outruns every other channel. And it's, you know, pretty straightforward because it's there's no physical contact in any element of any landscape. A fraudster gets to be wherever they wanna be with their phone in their hand, taking a picture of a fraudulent check and attempting to pass it off. You know, it's no surprise here. It's the the number one channel, and it has been and is continually part of the discussion when, you know, you go to panels and you talk with, you know, digital solutions. Mobile is always number one. ATM coming in a second again. This is another one where the digital world has come into play, so not having to be, you know, standing across the line from, you know, a physical person is just a simple and easy opportunity for the fraudsters. Back office and then branch and teller coming in at about the same. And really, you know, it's not really a surprise, you know, from the aspect of the numbers. But, you know, the fact that, you know, in branch and teller is still, you know, seventeen percent for institutions, that's a pretty high number. And, you know, the hope there is that, you know, again, advancing with the right solutions really start chipping away at some of these numbers and these volumes and bringing them down. And so now we get to the interesting interesting world of check fraud by type. You can see that, you know, the float numbers and the kiting numbers, paper hangers, you know, maybe not quite as robust and maybe not as frequent as it used to be. However, pay forgery, washing, counterfeit checks, everything's on the rise. And I think the important element to point out when you look at that particular landscape along with it includes new accounts and it includes endorsement forgery, you're talking about the digital element of the world that we live in today with being able to, you know, go and create the image of a check that may or may not actually be a check to then have that submit through a mobile channel or an a team or I team channel. And so the fraudsters are just as advanced, you know, and getting more advanced in the technology landscape, which, you know, only defines more of the need to, you know, participate and support digital solutions across different varieties of flavors in an effort to, you know, prevent and mitigate that check fraud. Alright. Poll number two. Are you currently using a technology based solution to detect check fraud? You know, I mean, it's kind of a straightforward question, but I think the answer is also kind of straightforward. It's gonna be really challenging for banks and institutions who are not taking advantage of the technology based solutions available today. It's gonna be a real challenge to, you know, reduce your check fraud and prevent and mitigate those fraudulent checks coming across the the nonphysical channels and even the physical channels as well. Check fraud solution. Are you currently using technology based solution to detect check fraud? Sent the survey out, and, you know, seventy percent said yes. So that's great. You know, the goal is to continue to grow and support the the digital solutions. And as you use them, you know, you get to evolve with them. Thirty percent from the survey we sent out came back and said that they were not using technology based solutions. And I think, you know, in that particular landscape, would say twenty twenty six is probably your year to, you know, really work through your discovery process to understand how the technology based solutions, you know, unify with the multilayered approach, Shield and ShieldPlus could provide a significant benefit and value prop to you. And so here we'll jump into the UniFi landscape and really kind of hone in and talk about what Allogene and our UniFi platform has to offer you. Yes. Thanks, Doug. So yes. So as as we based on what Doug has presented so far about what's happening in the industry around fraud and the the the information around that, right, the all the details that he's provided around what's going on, We want to also show you how Unifi fits in that picture and how we can help you as a financial institution to mitigate those occurrences of fraud. Now we have a multilayered approach to check fraud mitigation, And that multilayer is is really along the lines of what are we doing as a solution, right, to help you in different ways to, you know, flag these items or to detect these items and to present it to you so you can take action. So the customer score is a a model of historical transaction. So as you process items within the system and from any channel, we're able to have a process where we can build a key by customer or by member. Right? And as they as they complete transactions, whether it's, you know, items all those items presented or transact or deposit that they made, we can we have an AI tool that is used to, you know, crunch all the data and provide information as to, you know, customer a or member a does, you know, ten items per week in terms of a deposit, and they do twenty thousand dollars during that period. For that same customer member, they also have checks that are presented on those checks that are presented, and the average value of those check is two hundred dollars. So whenever we see anything that comes in that's presented either through deposit or through the honest channel where an item is presented that is outside of that average, we can detect it and and let you know and let you make the decision on the item whether you want to accept it or or or reject it. So it's more on what is the what what is your activity level, and and we look at that and then make the decision to allow you to review it. We also have the check image analysis where the check goes through different processes in terms of, you know, based on historical data of of that check, you know, how it's how it's written, how the date is written, how the how the signature is written, all that all those are are we look at everything there, like twenty four points of the check, and then we any anomalies that we detect as part of that based on the result that we received, we then can flag those items for review as well. So we hear a lot about check washing and everything around that. Those are some of the cases that would be addressed as part of this check image analysis process. And then make a line review of known reported transactions. So this is where based on the MCR information that is passed in, so it's more data bay data related where we can say this account number was found to be, you know, fraudulent, for example. This r t n account combination was found to be fraudulent, or this account was has an account closed, for example, or was reported as being closed. All that information is passed to us. We use that at the time of capture to then make decision to to review that item and allow you to make that final decision about about it. Next slide, Doug. And and then this is where the whole review comes together. We provide functionality within our system, within our solution to allow you to review these items easily and in a more streamlined fashion. So on the left, the far left, we can show information about the transaction information, what is part of the transaction. And this is where I mean, this is an example of back counter capture where, you know, at the tell at at the branch, you have batches of work transactions that you've you've accepted that you want to capture so you can start the clearing process from that. So as the check is being captured, once we recognize the code line, that item is sent for lookup to the fraud service. And where you see the bottom of the screen there where you see fraud suspect, it returns the information in real time and allow you as the person who is capturing that item to make that decision. Here, we say recommended action is deny because the item amount is is above the allowed threshold for the account, and the check number is below configured threshold. So it could be a case where based on those two factors, this item is more likely could be, you know, positive fraudulent item or it's a high probability of being it being fraudulent. So based on those two factors, the recommended action is denied. So provide some details, not just the details, but it provides you additional information as to what what actions to take as part of it. And then on the right, it gives you the options to actually take the action, which is accept, accept on the hold, or just to deny. Next slide, Doug. Here is also where we do the turn what we call the corrections module. This is a case where from a code line and from a business rules point of view, we can have business rules within the system that tells you what pieces of the code line are allowed or what values are are are allowed on the code line itself. In this case, for the Oxonos, we have a we have a country character, is a question question mark. Those are flagged because we only want to allow digits numeric values that are numeric values. Right? So all that is part of the the the business rules that we employ within the system to help you to ensure that every single check is captured in the correct way. We do we do get all the, you know, complete code lines that helps us to store the information properly, and then it also lends itself to doing the correct duplicate detection process on these items. Next slide, please. Image quality verification is another one where we can based on the image sets that are are the image set configuration we can check for different things. It's all it's image quality as well as image usability. So the date test, for example, is it still dated? Is it is it post dated? We can look for the presence of a signature. We can look for the presence of an endorsement on the rear of the image. So all those things as part of IQA would be flagged if we don't see those occurrences or we don't see those those characteristics on the check, and and then flag it for review here where the user will be able to make the final decision on the item. In this case, the failure reason is missing signature. User will get some intimate intimate information as to what the remedial action should be, and then they will make the decision to accept or reject the item. Next one, Doug. Hey. So I'll jump in here. Thank you both for presenting all of that today. Before we wrap up, though, I do, we here at Alligent would like to invite you all to our upcoming payments modernization lunch and learn event on May twelfth. It'll be taking place in the Atlanta area, and we're gonna be focused on talking all things payments modernization and evolving deposit automation and fraud strategies. It's a great opportunity to continue the conversation and explore practical next steps in a much more interactive setting. I will drop the registration link in the chat if you or anyone on your team is interested. We hope to see you there. And then with that, we are going to move into our Q and A segment. I will give everybody a chance to drop any questions that they might have. But let's see. First question that I am seeing is, is there a way to determine whether the consortium data referenced in this webinar includes contributions from FIs within our geographic region? Yeah. You want me to take that one, Albert? Yes, please. You can take Sure. Yeah. So in the world of consortium data, there are ways to obviously include, you know, the opportunity to understand if that information and data is, you know, related to you geographically, you know, based off, you know, routing numbers and information. I would say more importantly in the landscape of consortium data, the more you know and the more you have access to from either a historical lens of knowing what's reported or if you're using, you know, previous processed checks to be able to try and verify, you know, the recently submitted one. The more knowledge you have and the more information you know is truly what leads you to the landscape of really being able to push the envelope in prevention and mitigation and, you know, have those items end up getting caught at one or more of the tollgate processes, you know, between the variety of the multilayered approach. So you can certainly, you know, increase your view into the regional landscape geographically. But I also think it's important to acknowledge the more information and data that you can leverage throughout your toll gates and review processes, the more likely you are to prevent items from getting through. Thank you. Next one I see is, what is the ROI for leveraging check fraud solutions? How much fraud do you really catch? So the the from an ROI perspective, we we work we have data that can give you details as to what we've caught, the average, and then talk through what does that mean for you or FI and for your business cases and everything else. Right? So we normally start from getting information from you as to what have you seen over a certain period. And then we can show you given what we know and what we have from a solution point of view and like what I told you about the how we detect and how we allow you to review those items and make those final decisions, we walk you through that process and show you how we could help you if we had those those solutions, you know, on, you know, to at your at your back end call to you utilize as part of your check processing solution. Thank you. Next one that I see in the chat is let's see. We are currently reviewing all posted checks under twenty five thousand. Can we set this threshold so it only looks at large item checks? You can. One of the things that we've seen is I mean, we have a lot of of cases where FIs will just, you know, look at the large item checks, and that's that's an that's an easy configurable option for us to turn on and allow you to do that. But the other thing that we will show as, you know, as consultants, right, is that activity is also a major piece of this where we see the process will will will do transactions that are below the minimum or below the threshold, and that then results in them getting access to funds that are possibly fraudulent items, and you catch that after the fact. Right? So we want to look at those larger items, but we also want to look at the activity as well because that's where we've seen over the years that fraudsters will use that as a means of, you know, testing the water, so to speak, and and then doing the big transactions that really leads to to losses. We're trying to ensure that we don't experience these, so we look at the activity as well as the large dollar amounts. Great question. And then last one that I see is what makes unified different in terms of fraud prevention and detection? Yeah. So as as as we noted before, right, one of the things that that and and we've been in banking operations at different institutions over the years, and we've seen things. Right? I think the main thing with this is that the fact that we can catch it up front, we can support multiple different fraud providers. Like, in the case of, you know, we can we can work with a fraud provider that looks at the image. We can work with a fraud provider that looks at the data. So when you put those two together, we're looking at, you know, we're looking at the full process, and we're looking at the full check to provide you the most consolidated fraud fraud mitigation tool that helps you to to achieve those goals of of making sure that your fraud cases and and and any probability of losses due to fraud is kept at a minimum. So UniFi is the there's a system that helps you to put all this together and to support multiple fraud providers that then helps us to look at everything holistically, that then results in you being able to manage much better as well as keep your fraud occurrences as well as cost to the bare minimum or to eliminate it altogether. Thank you. That looks to be our last question. As we draw this to a close, I also wanted to highlight that the twenty twenty six check fraud benchmark survey that we discussed during this webinar is available for download on Alligent's website. We encourage you to take a closer look at the full report, which includes additional data and insights to help your fraud mitigation strategy. I will drop the link to the survey report in the chat as well. Thank you, everybody, for coming out and joining us today. If any additional questions have popped up, please feel free to reach out to marketingalligent dot com or visit our website. Please be sure to check our events page for all future webinars and more information on the Lunch and Learn event. If you enjoyed this one, we appreciate your time with us this afternoon, and we hope you have a great day.