Is America Ready to "Bounce" Checks?
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As announced in a recent news release, it seems the UK Payments Council has decided it is too costly to continue processing checks and they will stop check processing by the end of 2018. Along similar lines, other countries – for example Norway and Sweden – have nearly eliminated check usage. Is the US ready for this? I'm pretty sure even if check writers in the U.S. said 'YES!', we're still at least a decade away from making a clean break from checks.
In all my years combating financial fraud, check fraud has always been a major pain point for banks and credit unions, and it continues to grow. So as a fraud prevention professional, you might think that eliminating checks sure sounds tempting. But by a bouncing' checks from our payment system, will we really eliminate a large chunk of bank fraud? It's possible, but it's not as if those dedicated to committing fraud are going to stop their efforts to steal.
Just look at the facts of check usage. Though check volumes are declining, check fraud is increasing. Financial institutions continue to lose billions of dollars to check fraud. Why? Because checks are a favorite vehicle for fraudsters. They are easily stolen from mailboxes and pocketbooks, relatively easy to duplicate or alter, and difficult to process for banks and credit unions.
I say eliminating check could reduce fraud because other payment mechanisms will replace checks. And now we get to the heart of the matter. Will the payment channels that replace checks be more or less susceptible to fraud?
In my opinion the payment channel is just a means to an end. It is the method through which consumers and businesses interact with their accounts. And also how fraudsters steal! Regardless of the payment channel, every transaction can be evaluated against the profile of the account. The question is whether the transaction is consistent with the account usage, not what payment mechanism is used to create or settle the transaction.
As new payment channels emerge and older methods diminish, banks and credit unions must be flexible in their ability to adapt. They must have technology in place to accurately assess account activity regardless of channel. They must provide training for analysts and investigators on the new channels and a new fraud' detection, mitigation and recovery strategies, something that I believe is lacking today. So are checks going away? Maybe, maybe not. But without question new channels will continue to be introduced that are more convenient for customers and susceptible to fraud. Are your solutions and training programs up to the task?
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Check Fraud