This referenced article is from the WSJ and discusses a spike in B2B payments fraud related to the use of checks. The piece points to an ABA survey that was just released (sample size = 151 banks) indicating that checks were the most common vehicle used for fraud and accounted for almost half of actual losses.
We pointed out similar findings in the member report released last year, with data supported by the AFP payments fraud survey.
‘A recent rise in check fraud could motivate corporate treasurers to ditch paper checks and replace them with faster, safer and cheaper electronic payments…Attempted check fraud increased to $15.1 billion in 2018—up from $8.5 billion in 2016—and accounted for 60% of attempted fraud against deposit accounts at U.S. banks, according to a survey released Wednesday by the American Bankers Association. Successful check fraud made up 47%, or $1.3 billion, of banks’ fraud losses—a rise from $789 million in 2016—closely followed by debit card fraud losses at 44%, or $1.2 billion.’
So the subtext is whether or not these types of results will further motivate corporate treasurers to shift away from checks more quickly. We actually have been saying that checks will decline more rapidly now for a couple of years anyway, regardless of the fraud instances and losses. Fraud is just one by-product of paper processes, with general payments costs and opportunity cost (lack of data monetization) being others.
‘ “It has been the fastest-growing fraud at our bank,” said David Frady, an executive vice president at Gulfport, Miss.-based Hancock Whitney Bank, a regional bank operating in the southeastern U.S…The rise has made it easier for the bank to advertise alternative payment methods and fraud mitigation tactics to its corporate customers. “This helps our clients understand why the electronic route can reduce risk and improve efficiency,” Mr. Frady said in an interview.’
But as has been the case now for a long time, the transition is much slower amongst smaller businesses, where checks still represent far north of 50% of B2B payments. Many different payments automation (and receivables as well) solutions have popped up on the market during the past several years, some targeting the SME space, where the most manual effort exists. It is coming steadily, and perhaps a few more fraud shocks will light a bigger fire under collective behinds.
‘Another challenge for treasurers is the integration of new payment tools into existing infrastructure. “One of the reasons for why we are still seeing check payments is data reconciliation,” said Hubert J.P. Jolly, head of channels and commercial banking for global transaction services at Bank of America Corp…The bank offers a range of services to its clients, including a tool that uses robotics and artificial intelligence to reconcile payments…The transition away from checks will take time, according to Mr. Helms, the Hansel Auto CFO. “I see a lot of smaller companies out there that are not willing to become more technologically savvy,” he said.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
