How Can Credit Unions Cut Check Fraud Nearly in Half?

By Roy Urrico09.10.2018

Check fraud accounts for 35% of industry fraud losses. In addition, with the growing popularity of new deposit channels – particularly mobile deposit – fraudulent deposits exploiting paper checks are rising again.

Greensboro, N.C.-based cybersecurity firm Advanced Fraud Solutions and Alogent, a-payment processing solutions provider, announced the release of a joint case study, “Fighting Check Fraud in Real-Time.” The study explored how AFS’s TrueChecks in conjunction with Alogent’s ImagePoint Hub significantly reduced check fraud losses at two credit unions, bolstering their omnichannel protection, simplifying check decisioning and lowering fraud losses to the financial institutions and members. (For consumers, losses from check fraud are on the rise to a median loss of $1,488 per incident).

As new deposit channels have gained widespread adoption, particularly ATM/ITM and mobile deposit, fraudulent actors search for new opportunities to exploit fraud prevention systems that have not kept pace with technological innovation.

“Check fraud is a persistent threat to banks and credit unions,” Ted Kirk, director of industry partnerships, Advanced Fraud Solutions, said. “By partnering with Alogent, we were able to create significant fraud savings for our mutual customers, providing them with an integrated, real-time check fraud solution that addresses both in-branch and remote deposit capture points.”

The joint solution, which draws on the TrueChecks database containing over ten-years of data from contributing institutions, allows credit unions and banks to mitigate fraud in real-time, leveraging: a vast fraud database from a large network of financial institutions, item processors and optional third-party sources; real-time responses on counterfeit, NSF, closed account, duplicate and other fraudulent items; API-based integration into existing and familiar workflows; and decisioning with Reg CC-recommended action and associated risk.

According to the case study, for the $237 million Greensboro, N.C. Summit Credit Union and its members, deploying the same fraud prevention tools across deposit channels was critical to the successful growth of mobile deposit. Between 2014 and 2018, Summit achieved a 43% YOY increase in mobile deposit users, but with this increase in users came an increase in check fraud. After launching TrueChecks in December 2017, the rate of checks returned due to NSF decreased nearly 50%. In May 2018, for instance, there were only two returned checks from the mobile channel. “You’re not going to stop fraud 100 percent,” Carol Nault, EVP & COO, Summit CU said. “But significant reduction in fraud can be achieved by adding additional fraud protection tools across all capture points, effectively limiting the potential for fraud to occur.”

The study wrote at the teller line, a similar reduction in fraud was achieved through improved decisioning at the $174 million Scranton, Pa.-based Penn East Federal Credit Union, which also experienced losses on altered and fictitious checks. At Penn East, where Alogent had already been implemented to reduce fraud at the teller line, fraud posed less of a risk in that channel that in the credit union’s rapidly expanding mobile deposit service. “We had significant fraud losses when we went live with mobile deposit,” Brad Gebert, IT manager, Penn East Federal Credit Union, said. “When we added TrueChecks to the equation, our fraud losses dropped to near zero. It paid for itself within minutes.”

Reprinted with permission from Credit Union Times.