Check use continues to decline — albeit at a decreasing pace. Wouldn’t it be logical to assume that check fraud will also diminish accordingly? Not so, according to data compiled by Bluepoint Solutions and presented in their whitepaper “Cheating with Checks.” The authors found evidence that check fraud is an even greater risk to a bank’s well-being than it was a dozen years ago when people were writing more checks.
While check-writing volume is at an all-time low — an estimated 13.7 billion in 2015 — the loss per check is now more than twice the loss level in 2003 when people wrote about 36 billion checks, Bluepoint found. What’s more, while fewer check fraud attempts are succeeding and those that do succeed cost more, we also need to consider the volume of unsuccessful fraud attempts and the impact they have on the industry. Bluepoint estimates that actual check fraud losses for 2015 will total around $648 million, while attempted losses will top $13 billion.
Successful check fraud attempts cost banks immediate dollar losses and longer-term losses as well, as defrauded customers lose faith in their financial institution and take their business elsewhere. Reputational damages can also stem from fraud attempts that don’t succeed. Merely knowing their money could have been at risk will be enough to turn off some consumers. Imagine the impact of repeated fraud attempts that affect the same customer or group of customers.
Multiple factors are likely driving the increased risk associated with check fraud, Bluepoint notes. Broader use of more secure EMV chip-enabled debit and credit cards may prompt some fraudsters to turn their attention to what they perceive to be lower-hanging fruit: checks.
Although digital banking continues to expand and check volumes contract, check fraud losses remain a significant point of concern for banks, Bluepoint concludes. According to the ABA 2015 fraud report, bank deposit account fraud increased to $1.9 billion in 2014, up from $1.7 billion in 2012. Of this, check fraud was $608 million. The report goes on to say that banks stopped more than $11 billion in attempted fraud. The Bluepoint report authors conclude that losses of nearly three-quarters of $1 billion merit attention and action from the industry, and we agree.
Banks need to remain vigilant about ongoing check fraud risks, even while finding new ways to secure digital and mobile transactions. It’s vital to invest in technologies that can help prevent fraud, like checks with multiple fraud-prevention security features. Detection is also key, and products like Deluxe Detect and Deluxe Provent can help banks reduce fraud and loss by quickly and accurately screening new account openings and protecting them. These technologies can save banks billions of dollars in potential fraud losses, and help customers feel more secure every time they write a check — no matter how infrequently.