Check fraud remains the most common and costliest type of payments fraud facing financial institutions despite the pace at which new payment methods are emerging.
Industry-wide, the cost to financial institutions grew from more than $900 million in 2007 to more than $1 billion in 2009. And it continues to increase even though check volumes are steadily dropping. The inverse trend of increasing fraud losses against the backdrop of declining check volumes highlights the vulnerability of checks as a payment method, and underscores the need for credit unions to seriously address this problem. Financial institutions are getting worse at stopping check fraud, not better. But newly available technology that is proven to reduce check fraud losses offer institutions an opportunity to stop increasing losses — for both the credit union and its members.
Often the most impacted victims of check fraud are not the customers of the financial institutions who are unknowingly depositing bad checks, not the financial institutions themselves. A study conducted by the Consumer Federation of America estimates that 1.3 million Americans have been victimized by a fake check scam, with an average loss of $3,000 to $4,000 per consumer. Credit unions need to evaluate what protections they offer their members to protect them from check scams and fraud losses.
Deploying a real-time solution at the teller line empowers credit unions to protect their members from check fraud losses. By alerting a member that a check has a high likelihood of being returned, the member has the option to try to collect payment through another method and will also be aware that they should wait for funds from that deposit to clear before writing checks against it. Your credit union is essentially shielding members from NSF fees, overdraft fees and missed payments.
Credit unions can access a shared database that contains up-to-date information on more than 90% of the demand deposit accounts nationwide to perform instantaneous fraud screening at the teller line. When an alert is received, the teller can inform the member of the reason for the alert and discuss with them the options of accepting the deposit with an extended hold, as allowed by Reg. CC, or allowing the member to try to collect payment on their own — truly treating the member as a partner in preventing check losses. Both the credit union and the member are protected through the screening process.
Bluepoint Solutions recently published a white paper entitled “The Changing Landscape of Payments: Lower Check Losses By Combatting Check Fraud.” The white paper examines the common types of check fraud and the associated costs to financial institutions, and then offers viable, proven methods that have been used to successfully combat fraud.
To view an abstract and download a free copy of Bluepoint’s latest white paper, visit http://www.bluepointsolutions.com/white-papers/check-fraud/. More information about Bluepoint’s real-time and batch module fraud detection suite is available here.
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