Skip to main content

The rise of check fraud and how digital payments can help combat it

In today's increasingly digital world, traditional methods of payment are giving way to innovative solutions that offer convenience, speed, and enhanced security. One pressing concern that has plagued businesses, government agencies, and consumers for years is check fraud. In fact, the Financial Crimes Enforcement Network reported an upward trend of over 680,000 reports of check fraud from banks last year. Meanwhile, the U.S. Postal Service has warned not to even send checks if possible, reporting a sharp increase in thefts from mail receptacles with 25,000 thefts in the six months ending March 30, 2023, compared to 38,500 for all of 2022 total. However, with the rise of more check fraud, we’re also seeing the rise of instant, digital payment solutions to combat fraud and benefit all stakeholders involved. 
Despite fewer checks, fraud is on the rise  
Overall, 1.8 billion fewer paper checks are written each year. But, according to the Federal Reserve, that still leaves about 3.4 billion checks in circulation, in the U.S. alone, as many small businesses rely on them for B2B or vendor payments. The average size of the checks Americans write has also increased from $673 in 1990, to $2,652 in 2022. That higher dollar amount makes them enticing enough to become a higher target for fraud.   
Check fraud is now part of sophisticated criminal operations. These operations include infiltrating post office distribution centers and setting up fake IDs or businesses to deposit the checks. Checks are often stolen from postal boxes, as criminals look for envelopes that look like checks or bill payments. Criminals have exploited the vulnerabilities of paper checks, including forgery, alteration, counterfeit checks, and check washing (removing ink from checks to alter the details). Scammers also use sophisticated techniques, such as phishing, to obtain personal and financial information from unsuspecting victims. These fraudulent activities have caused substantial financial losses, strained business relationships, and wasted valuable time and resources. 
What can be done to combat fraud?  
There are several means that can be used to combat check fraud, including finding the right digital payment solutions to integrate into payment processes. Here are just a few:  

  • Avoid sending checks in the mail. Instead, pay digitally. Digital payments are faster and safer than sending paper checks.  
  • Businesses may opt-in to a bank’s “positive pay” service with a business checking account, which helps the bank detect fraud by matching the dollar amount, check number, and account number, limiting the criminals’ ability to wash the check. 
  • Consider using e-statements to present customers with their bills. By providing e-statements that include a customer service number, the business or individual can pay over the phone or via a website rather than mailing a physical check. 

How can digital payments help stop check fraud?  
82% of American consumers have already adopted digital payment methods in their day-to-day, with 65% of those consumers believing digital payments to be more secure than checks. And they’re right. Digital payment methods are more secure than traditional check payments because they are protected by multiple layers of encryption and authentication processes. This helps to reduce the risk of account takeover and other types of financial crime. Today’s digital payment platforms offer security against outside threats by providing advanced identification methods; multi-factor authentication to prevent unauthorized charges and secured networks that protects all transactional data.  
From enhanced security measures, to reduced human error and more, here are some ways digital payments can ensure funds are secure and are being routed where they’re supposed to go: 

Enhanced security measures: Digital payment platforms incorporate robust security measures, such as encryption and multi-factor authentication, which help safeguard transactions. By eliminating paper checks, the risks associated with physical handling and mail delivery are mitigated, reducing the chances of interception and alteration. 

Reduced human error: Traditional payment methods involving paper checks are susceptible to human errors that can be exploited by fraudsters. Instant, digital payments eliminate the need for manual data entry and verification, minimizing the chances of inadvertent mistakes and reducing vulnerabilities that criminals can exploit. 

Accessible digital audit trail: Digital payment systems maintain detailed records of transactions, creating a comprehensive audit trail. In case of any discrepancy or suspected fraud, businesses and individuals can quickly trace the origin of the transaction, aiding in investigations and legal proceedings. 

Increased efficiency and cost savings: Digital payments are swift, seamless, and require fewer manual processes, resulting in significant time and cost savings for organizations. By improving processes, organizations can redeploy resources to other necessary activities. Moreover, instant payments reduce the time required for funds to clear, ensuring faster availability of funds and reducing the window for potential fraud attempts. 

Secure integration with e-commerce: Digital payment systems seamlessly integrate with e-commerce platforms, offering secure payment options for online transactions. With features like tokenization, where sensitive data is replaced with a unique identifier, customers can make payments without exposing their financial information. With an overall increase in cybersecurity (e.g., firewalls, penetration testing) to protect sensitive information, digital payments can significantly reduce the risk of a data breach. 

By adopting digital payment methods, organizations and individuals can protect themselves from the risks associated with traditional payment methods, ensuring secure and reliable financial transactions. These innovative solutions offer enhanced security, real-time fraud detection, reduced human error, accessible audit trails, increased efficiency, and cost savings.  

At Conduent, we offer a variety of services that enable businesses, agencies, and individuals to use instant, digital payments as opposed to paper checks, thus reducing check fraud. Additionally, these payments are faster than paper checks. We also offer e-statement presentment rather than sending physical statements in the mail. E-statements can include information that allows a business or individual to make a payment over the phone or through a secure website. To learn more about our Digital Payments Solutions and how they can prevent check fraud, visit our Digital Integrated Payments Hub page. 

About the Author

Kathy Mertes joined Conduent in early 2022 as Executive Leader of Conduent’s Digital Payments Strategy and Solution. In keeping with Conduent’s corporate strategy, she is shaping the transformational role that payments can bring to Conduent’s enterprise suite of solutions by removing payment friction in a comprehensive, innovative fashion. In her nearly 30 years in the industry, Kathy has coupled her banking expertise with client needs in a wide range of industries from government, corporate, healthcare and beyond –– spanning credit card fraud prevention, innovating consumer payments at a top National University, leading product and operational responsibilities for money markets and asset management accounts at a brokerage firm. Most recently, Kathy has led key strategic teams at BNY Mellon Treasury Services. Kathy has been a featured speaker at various key industry events such as NACHA and IBTTA and is pleased to provide leadership as a member of The Clearing House (TCH) Corporate Advisory Group.

Profile Photo of Kathy Mertes