ACH Fraud Jumps - Are You Surprised?
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Checks represent a "big" target for fraudsters, but ACH fraud is growing faster
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ACH fraud growth, in fact, surprised industry leaders
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Has effective fraud prevention throttled check fraud growth?
We've spent a significant amount of time and space in this series looking at the ways check fraud has asserted itself in the "bad guys ecosphere" recently in spite of the growing popularity of alternate payment channels like, for instance, ACH.
It turns out that, while checks are indeed a broad and common target for fraudsters for reasons of accessibility, low expense, and still-common usage, ACH fraud is growing by the greatest rate of all channels.
ACH Becomes a Target
Digital Transactions reports findings contained in the 2018 annual fraud report from the Association for Financial Professionals, a trade group for financial managers in a wide variety of industries, that as payments continue to grow across the omnichannel, so does the number fraud attempts and losses, including ACH.
Some 33% of responding organizations said they had been the victims of actual or attempted fraud on ACH debits last year, up from 28% in 2017. Meanwhile, 20% reported being the targets of ACH credit fraud, up markedly from 13%.
The distinction here is that, while checks lead in terms of largest percentage of losses, ACH fraud is growing at a faster rate than other channels.
The American Banker's Association Deposit Account Fraud Survey, for instance, reported that in 2018, check fraud accounted for 47% (or $1.3 billion) of industry deposit account fraud losses, almost neck-and-neck with debit card fraud losses—signature, PIN, and ATM combined—which were at 44% (or $1.2 billion). The remaining 9% (or $265 million) of losses were attributable to electronic banking transactions, including bill-pay, P2P transfers, wire, and ACH transactions.
ACH Fraud Growth Exceeded Expectations - But Why?
However, ACH fraud losses are growing faster now than anyone could have predicted. So fast, in fact, that Magnus Carlsson, the manager for treasury and payments at AFP, proclaimed the ACH results "probably the most stunning numbers we saw in this report. I went back to the research department and said, 'You have to double-check these numbers.'"
Carlsson continued by providing his insights on a possible explanation for the rise, "A likely explanation for the higher fraud lies in the popularity of ACH, along with wire transfers, for schemes like business email fraud, phishing fraud, and account takeovers."
As fraudsters continue to utilize more sophisticated methods and means to commit fraud, it is critical for banks to evaluate and deploy new technologies like AI and deep learning in order to prevent and detect fraud attempts. As we continue to see fraud attempts and losses rise, banks are tasked with managing fraud across the entire omnichannel. What strategies are you currently or looking to deploy to optimize and strengthen your organization from fraud?