Cheating With Checks: An Update on the Changing Check Fraudscape

Check writing isn’t what it used to be. Check volumes continue to drop, and that’s good news for banks and credit unions, but they’ll be with us for many years. And they still represent a significant source of dollar losses—still nearly three-quarters of a billion dollars a year—affecting 90% of financial institutions. The dollar value of the checks, which is declining more slowly than the volume of transactions, is further multiplied by other costs, ranging from prevention to investigation to repairing damaged reputations.

This white paper, the third biennial update in a series from Alogent, analyzes the most recent research and industry data, and concludes that crossing check fraud off the executive to-do list is both premature and perilous. There’s still much work and due diligence to be done.

Collaborative loss prevention efforts of recent years, such as shared databases, have been working. Given the right technologies, fraud checks and hold policies can be automated and customized, and many fraud attempts stopped before they happen. However, fraudsters are nothing if not adaptable, and check fraud attempts may be on the rise again with the huge upcoming surge in mobile banking, with its new opportunities for fraud compared to in-branch deposits, and the rapid deployment of EMV-chip cards, which make card fraud more difficult.

In such changing times, long range planning and predictions are more difficult than in earlier, more stable decades. However, the tools to curb loss are also evolving quickly, allowing consolidation of multiple vendors and systems, and potentially incorporating all points of deposit capture. Moving to a single, affordable, seamless solution, smoothly integrated behind the scenes with specialized systems, has become one of the most effective prevention strategies available to both credit unions and banks.

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