HENDERSON, Nev. (1/11/16)--As electronic payments increasingly dominate the financial services landscape, the use of paper checks continues to recede. But check fraud remains a very costly threat for financial institutions, according to a new white paper from Bluepoint Solutions.
Debit and credit cards accounted for $943 million (54%) of the $1.744 billion total payment losses by financial institutions in 2012. Check payments accounted for $648 million (37%).
“Dollar losses from continuing check fraud have not decreased as much as transactions volumes,” said the paper, “Cheating the Checks: An Update on the Changing Check Fraudscape.” As volumes have dropped, the average loss per check has risen steadily since 2003. Loss per check issued has risen from two cents in 2003 to five cents in 2015.
Each check written today is more likely than ever to present risks, according to the paper. Checks are still the leading target for attempted fraud, according to the Federal Reserve. In the near future, the ramp-up of EMV-chip cards--which are even more difficult to abuse--may once again make checks a more attractive target for fraudsters. Any further increase in fraudulent checks carries a disproportionately higher risk of loss because the average amount of a check transaction far exceeds that of card payments.
The new conventional wisdom is that the mobile channel is the future of financial institutions. Mobile devices have become so ubiquitous that even the oldest generations, who may spurn computers and social media, are becoming comfortable using mobile channels for sensitive medical and financial transactions.
“Financial institutions are rightly pursuing aggressive mobile channel strategies, both with consumers and business account holders,” the paper said. “It is no surprise that the risks associated with the rise in mobile banking are a subject of much concern and industry attention. The actual losses due to mobile payment fraud are not yet large. However, when the rate of change is extremely rapid and apparently relentless, opportunities for fraud multiply and warrant close monitoring.”
Among those technologies--and opportunities--is mobile remote deposit check capture, which is expected to grow 40% in 2016, according to the paper.
“At the same time, rapid deployments of this magnitude offer both great potential service and profitability opportunities to institutions, and equally great incentives and opportunities to fraudsters,” the paper said.
Moving from multiple vendors and fragmented legacy technologies to affordable, fully integrated systems has become one of the most effective prevention strategies available to both credit unions and banks, according to the paper.