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Push Notifications – Putting the Onus of Check Fraud on Consumers?

  • Check fraud is on the rise in the US
  • Fraudsters have many methods at their disposal
  • Direct engagement between banks and customers can help reduce fraud

In an article at Refine Intelligence, Daniel Shkedi, Head of Product Marketing & Strategy at Refine Intelligence, opens with a flashback:

Late one restless night in 2023, I found myself in front of the television, mindlessly flipping through channels until I stumbled upon a classic: Steven Spielberg’s Catch Me If You Can. Captivated by Frank Abagnale's exploits in check fraud, I couldn't help but wonder: why aren't modern-day fraudsters still employing such elaborate schemes? As the ending credits rolled, my curiosity arose, pushing me to dive deeper into the world of check fraud in the U.S banking industry.

Check fraud is on the rise in the US, with reported cases nearly doubling from 2020 to 2022. The article goes on to explore common methods used by fraudsters, including "glass check fraud" which involves theft of mailed checks, "check washing" to alter check details, counterfeiting authentic-looking fake checks, and account takeover to initiate fraudulent transactions.

Screenshot-2024-04-02-at-7.12.44 AM
A fraud ring selling ‘glass checks’ from over a dozen U.S banks in a dark web fraud forum. Source: Daniel Shkedi/Refine Intelligence.

Mr. Shkedi goes on to define other methods of check fraud including counterfeiting checks and account takeovers.

Pushing Responsibility to the Consumer?

Mr. Shkedi explains that FIs need to adopt technologies and practices that foster "direct communication with their customers." This enables FIs and their customers to detect check fraud faster. In most cases, check fraud takes advantage of the time it takes for funds to clear as well as the lack of direct communications between bank risk teams, branches, and customers.

Direct engagement with customers through in-app pushes, SMS messages or omnichannel communications is extremely important in combating check fraud for several reasons:

First, it dramatically reduces the time it takes to gather critical information from the customer regarding a suspicious check, allowing both sides to take prompt action in confirmed fraud cases.

Second, direct engagement provides an opportunity for financial institutions to educate customers about emerging fraud trends, best practices for safeguarding their accounts, and steps to mitigate potential risks.

Finally, personalized communication creates a sense of trust and transparency between financial institutions and their customers, fostering a proactive approach to fraud prevention.

This method is utilized by many financial institutions for a multitude of reasons, using multi-factor authentication where the consumer receives a SMS message with a code to sign into their account to alerts for suspicious activity/transactions.

So, why not checks?

Pitfalls of Relying on Consumers

These notifications/communications can be quite effective in detecting check fraud. However, FIs need to be cautious as there are many pitfalls. These include:

  1. Consumer inundated with too many messages: consumers receives dozens to even hundreds of notifications daily.
  2. Customer may miss the notification: is the policy clearly defined on what actions occurs if a consumer does not respond? Does the onus now transfer from the bank to the consumer if it is a fraudulent activity?
  3. Increase calls to banks: Inevitably, a portion of these consumers will reach out to the FI to question the transaction. FIs will need to be prepared on their end to handle the incoming inquiries.
  4. Notifications interpreted as fraud: Oddly, a notification that is alerting fraud can be mistaken for a fraud attempt. Many consumers are wary of receiving SMS messages, even if they are legitimate communications from their FI. This confusion could lead to customer dissatisfaction.

The article notes that success will mean enacting proactive fraud prevention strategies, like helping customers understand fraud techniques and fostering transparency through direct customer outreach -- including direct engagement with customers through in-app pushes, SMS messages, or omnichannel communications. And, while the strategy is sound in theory, there are many pitfalls that FIs need to consider.

Cell phone mobile

However, this will all be futile if FIs do not have the right technology on the back-end to detect fraudulent checks. The FI cannot simply push all check payments to the consumer to confirm. FIs must deploy myriad technologies such as behavior analytics, image forensic AI, consortium data, and dark web monitoring that will ensure that the fraudulent check transactions are flagged so that neither their fraud reviewers or consumers are inundated with false positives.

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