Check fraud in the digital age: Why it's still a threat to your business' bottom line

Check fraud is still a threat to businesses. Using safeguards like Positive Pay can block bad actors from accessing your funds.

Our expert team from Minnwest is here to explain why check fraud is still a concern for any business owner — even those that rely mostly on digital payments — and how fraud prevention tools like Positive Pay can provide peace of mind.

Why is check fraud still a threat?

In an age of digital payments, people are surprised to learn that check fraud is still something to be concerned about. Yet of all business payment methods, paper checks are still the most vulnerable to fraud.

In 2022, a survey of businesses revealed these insights about check fraud:

• 63% of businesses have reported check fraud activity, topping the list of payment fraud types. (Corporate card payment fraud came in a distant second at 36%)
• 75% of businesses plan to continue using paper checks to some extent.

Crime of opportunity: For fraudsters, check fraud is one of those crimes that’s easy to pull off: Low cost, low tech and high opportunity. Paper checks have highly sensitive details printed right on the front — the account number and routing number. If a mailed payment falls into the wrong hands, a criminal can use one of several methods to siphon money out of your account:

• Check washing is seeing a marked increase. Just use some chemicals to wash away the filled-in amount and payee and, voila, the fraudster has a blank check.
• Bogus check printing
• Fraudulent transfers: Criminals can also use your account information to pay themselves via ACH transfer (30% of business experienced fraudulent ACH debits in 2022).

Why your business still needs check fraud protection

So you think your business is safe because you write very few checks. Even if you keep check writing to a bare minimum, perhaps a few times a year, it’s important to be vigilant against check fraud.

High handling: All it takes is one check falling into the wrong hands. Consider the number of people handling a paper check payment, and opportunities for someone to grab it from a mailbox or desk:

• Individuals outside the company were the cause of 54% of business payment fraud cases in 2022.
• Third parties, including unethical employees working for service providers and vendors, 13%.
• The U.S. Postal Service is grappling with a marked increase in robberies carried out against mail carriers and mail theft from postal boxes, 11%.
• Unethical employees, 3%.

Regardless of how many checks you write, an unprotected account is still more vulnerable to fraud. Recovering from fraudulent activity can be time-consuming and costly. A majority of businesses recoup less than 10% of funds stolen due to payment fraud.

How to protect your business against check fraud

Getting the upper hand on check thieves is easy when you safeguard your account. Minnwest offers Positive Pay to help you set up a line of defense against criminals attempting to siphon away your hard-earned funds.

Positive Pay detects unauthorized payments on your checking account so you can gain control of your accounts payable like never before. It provides fraud detection for both check and ACH payments and it’s easy as 1-2-3.

1. Upload: Enter payment details into the Positive Pay system (account, check number, date, amount and payee). This can be done conveniently with an upload, or by entering manually.
2. Match: The system automatically compares payment details to your list of approved payments.
3. Alert: You get a push alert for unknown or questionable payments to either pay or return.

For example, let’s say a thief intercepts a check payment you had mailed to a vendor, and uses it to pass off a bogus payment. Positive Pay will catch the discrepancy and alert you via text and/or email. Once you review and identify the payment as unauthorized, you can tell the system to reject it.

Positive Pay also comes with an intuitive dashboard that lets you customize the tool to fit your ACH needs. Once it’s set up, it’s easily incorporated into your accounts payable procedures, ensuring a smooth process.

• Create a list of vetted and authorized payees
• Set parameters for ongoing ACH payments
• Create an audit trail for payment changes
• Customize level and frequency of flagged payment notifications

Protect what you build with Minnwest Bank

As you build your balance, it’s important to protect it. That’s why at Minnwest Bank we’re serious about account security. We monitor all transactions and notify you if we see something suspicious. But we also offer Positive Pay as an extra layer of security. Making payments with the peace of mind that they are protected when something goes awry is priceless.  

Want to learn more about Positive Pay and how to implement it for your business? Reach out to one of our helpful experts in our Cash Management team.