How AI Is Transforming Fraud Detection in Modern Payments—With a Focus on Check Fraud
- Banks and credit unions are rapidly adopting AI to fight fraud
- Check fraud is evolving quickly
- AI-powered fraud detection systems are fighting back
The accelerated shift from paper checks to digital payments is transforming the landscape of fraud detection, as highlighted in the Wrestling Payments podcast featuring Brian Keefe, Manager of Portfolio Pre-Sales at Nice Actimize . While banks and credit unions are rapidly adopting artificial intelligence (AI) to meet new Nacha rules and federal mandates, one of the most persistent and underestimated threats remains check fraud.
At around the 8:45 mark, Mr. Keefe and host Joe Casali dive into the ongoing reality and evolution of check fraud. Although digital payment options are expanding and government plans aim to eliminate paper checks, Keefe observes that check fraud is often overlooked, even as it remains particularly prevalent despite digital advancements.
And I don't think check fraud gets enough exposure. I think it's much worse than people think. And I think AI has helped these bad guys. I call them bad guys. It's a technical term, but they're they had all the traditional methods of doing check fraud, but they're also using AI.
Fraudsters Leveraging AI and Technology
Mr. Keefe further emphasizes that fraudsters are leveraging both traditional and AI-enhanced tactics to perpetrate check fraud. Sophisticated printers and designs make counterfeit checks harder to detect, while AI tools—now easily accessible, even to criminals—enable them to forge, alter, and distribute high-quality fraudulent checks at scale.
Also pointed out: Bad actors form organized groups that share tactics on the dark web and constantly adapt their techniques. These criminal networks not only exploit check vulnerabilities but also utilize synthetic identities and cross-channel attacks to bypass detection. The discussion underscores how rapid digitization and new technology have not eliminated old threats—they have, however, pushed institutions to adopt smarter, AI-powered monitoring to stay a step ahead.
AI Technology to Fight Back
AI-powered fraud detection systems now analyze transactions in real time, compare checks and account patterns, and rapidly identify suspicious activities that traditional systems might miss. Mr. Keefe advocates for solutions with “guardrails,” ensuring that AI augments rather than replaces human investigators, providing explainability and transparency in its decisions.
This is how many financial institutions approach check fraud, leveraging technologies like image forensic AI for both on-us and deposit fraud detection, producing risk scores on flagged items. These scores are accompanied by explainable AI (XAI) details to assist fraud analysts in determining whether the item is fraudulent.
Checks will remain a top target for fraudsters until the industry is able to stop a majority of fraud attempts -- which will only occur when there is full adoption of AI check fraud technology across the industry.