No Need to Worry About Check Fraud - Checks are Disappearing, Right?
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As a follow up to my last post, I wanted to discuss that there seems to be somewhat of a misconception related to checks these days. Many people claim checks are disappearing, and they quote all sorts of facts and figures related to growth in ACH debits, image exchange volumes, debit card activity, etc. The fact of the matter is all of these things are certainly true, nonetheless, checks continue to be issued in massive numbers.
These items may not be clearing as paper checks, but a high volume of transactions are still issued as paper, then converted to ACH or cleared via image exchange. And check fraud is certainly not going away as the 2009 ABA Deposit Account Fraud Survey Report clearly demonstrates. In fact, for the first time in history, estimated industry losses related to checks exceeded $1 billion in 2008.
If you compare the number of fraud cases in 2008 to the prior Report which was based on 2006 banking industry data, the number of cases increased from 561,306 to 760,955. This comparison also reflects that check fraud grew dramatically from 2006 to 2008. However, after analyzing the ABA report, it is clear that banks are working hard and investing heavily to fight check fraud. And it appears there is some degree of success, because although check fraud attempts exceeded $11.4 billion in 2008 according to the Report, the loss amount per case decreased from $1727 in 2006 to $1346 in 2008 and there was a successful loss avoidance of $10 for every $1 dollar lost.
The inference is clear: banks are detecting check fraud earlier, and effectively reducing the average loss per case, as well as investing more in prevention solutions (both systems and analysts to work the alerts produced); in spite of banks' efforts, check fraud attempts are growing so rapidly that growth in losses seems inevitable. This has to be very frustrating, and the obvious question is – what more can possibly be done? Is it inevitable that fraudsters will successfully steal more money each year in spite of all the industry's efforts?
Outdated solutions that banks use today produce somewhat limited results at great cost in both time and money. People are a bank's most expensive resource, and with the high false positives that current systems produce, banks typically have to raise dollar thresholds to deal with the volume of alerts produced and/or hire more analysts to deal with the increased volume. How many times have you experienced the situation where an analyst, overwhelmed by the sheer volume of false positives, makes a poor decision on an alert resulting in a loss to the bank? False positives are costly in many ways, not just in the time required to process them all.
Current systems are not providing the results banks deserve. Banks need new loss prevention systems which are more accurate in detecting check fraud, that minimize the false positives current solutions produce, and that provide all the information analysts need to accurately decision alerts quickly, resulting in pronounced operational efficiency. There is a better way, and leading edge banks are quickly realizing they can enjoy far greater benefits from their check fraud prevention investments.
If you could dramatically reduce your check fraud losses AND reduce the number of FTE required for check fraud prevention, what would that mean to your bank? Could you use those budget savings to address online fraud? ACH fraud? Wire fraud? It sounds like an opportunity to really get check fraud "under control†to me. What do you think?