Younger generations are more comfortable using digital payment apps, and these apps are easy to access and use. This has resulted in a dramatic shift in the way payments are made and accelerated the business world’s adoption of more robust digital payment applications.
Against this backdrop, the printed check might seem headed for almost certain obsolescence, but nothing could be further from the truth. Businesses of all sizes still rely on checks as a primary form of payment. The shift in focus to digital payments has helped make checks prime targets for fraud by overshadowing the continued reliance on them.
Deterrents that guard against physical forgery and alteration can add necessary security to printed checks, but businesses often overlook their older printers as significant security vulnerabilities in the check-printing process. Many check printers in use today run firmware that is obsolete and unsupported, creating significant risk for data theft or alteration as checks are printed.
Check fraud remains among the top forms of payment fraud. While it has decreased over the past few years, drastic or sudden changes in processes, such as those initiated by the pandemic, have created new vulnerabilities that criminals will exploit once they discover them.
Staying up to date on payment security is the best way to protect your business and customers from fraud. A few basic questions can determine your payment security: Do you know how check fraud is committed? What measures are in place to ensure the security of customer transactions?
The most common fraud method is alteration of the physical check, which typically involves check washing—the removal of a printed character with a common solvent, such as acetone—or check scraping, the removal of a printed character by carefully scraping the ink or toner with a sharp object or lifting it off with tape. Once the payee or amount has been removed, the check is simply reprinted with the fraudulent information.
There are steps you can take to protect your checks from fraud. MICR printers ensure that printed checks meet all financial industry standards, but some also have built-in network security features that can reduce vulnerability to fraud. For example, some printers have advanced features that prevent unauthorized access to MICR print functions, signatures and form overlays, or that protect the data stream while it is being transmitted.
In addition to making security enhancements to printer firmware, a high-quality MICR toner can help ensure proper character density. This not only reduces the chance of scanning errors and returned checks but also includes modified adhesion characteristics, which guard against scraping. MICR toner is available with incorporated red dye, which releases a stain onto the check if chemical washing is attempted.
The highest level of protection against mechanical alteration is the use of “indelible” printing, a process in which the printed characters permeate the document, preventing the character from being removed without destroying the check. Best-practice MICR check printing also uses blank-check stock rather than stock with a preprinted MICR line.
Security fonts are another key element in fraud mitigation. A secure numeric font should be used as an added layer of security. This type of font is difficult to alter because it has unique characteristics, such as special backgrounds, texts and numeric elements that are printed in the amount line of the check. A microprint font adds yet another layer of security on the printed check. The extremely small font embeds personalized microtext and numbers into each check.
While digital transactions are clearly the future of payments, they have not eliminated other forms just yet. Checks and other physical forms of payments are still essential for daily transactions and are not going away. Financial institutions should not lose sight of the volume of payments these types represent and should consider taking steps to protect themselves from fraud.
Nathan Holstein is marketing manager for TROY Group.
Find out where things stand with fraud protection and how it can be done more efficiently and effectively in the BAI Executive Report, “Finding an edge in fraud’s cat-and-mouse game”.
