Loss Prevention Concepts for Retailers

Payment fraud in retail can fall on a variety of payment channels. With Mobile technologies, new self service options as well as online fraud, the environment is evolving quickly. However, one must not forget about the losses incurred in check fraud.

Check fraud losses in the US were last benchmarked and estimated at $893M for financial institutions from a 2011 ABA Deposit Account Fraud Survey Report. However, one of the main considerations in overall losses which was not incorporated were retailer losses. No one knows the exact number, but we have spoken to several consultants who estimate it at 10X the losses of banks. This event occurs when a fraudster purchases goods from a retail location with a fraudulent check and then departs with the product/goods. If the bank of first deposit, or paying bank, identify it as fraudulent, many times the retailer loses.

Banks can help their retail clients with new online systems which validate check data fields as well as image characteristics. These online systems are built real-time and are available for immediate verification. Online systems like Early Warning can identify deposit fraud risks, while image analysis platforms, like OrboGraph Sereno, can flag fraud suspects of on-us items and payees/payers who are fraudsters based on transactional history, even targeting specific geographic areas.

By offering these improved fraud services, banks could actually leverage the technology within their RDC offerings, taking the image and clearing it immediately. To enable retailers for this environment, they need to have image scanning options for their customers. If banks don’t move in this area, others will. Mobile check image capture at the POS could help move this forward.

For additional concepts and articles on this topic, check out the Integrated Solutions for Retailers Newsletter by Retail Solutions Online.