By : Andrew Short
October 08, 2015 12:00 PM
Mobile remote deposit capture (RDC) is more popular than ever, with one in seven Americans using this method to deposit a check in the last year, but are consumers and businesses aware of the risks?
While there are undoubtedly benefits to using the service, it also opens up a new channel for fraud. Mobile RDC comes with all the risks of traditional deposits, but with the added potential for serial or duplicate deposits.
Given that checks remain the most targeted payment method by those committing fraud attacks, according to the 2015 AFP Payments Fraud Survey, this is a significant area of concern for banks and financial institutions.
Holding on to checks is a big problem. After the customer makes the digital deposit using their smartphone, he or she keeps the physical check, which opens up the possibility of duplicate deposits being made inadvertently or intentionally. In one example seen recently in the news, an employee made an RDC deposit late on a Friday and then physically deposited the check the next day, knowing that neither would get processed until Monday. This was eventually spotted, but the risks remain unless the right technology and processes is in place.
The longer a customer holds on to those physical checks, the greater the risk that one might reappear and be deposited again. Financial institutions are shortening the time they recommend customers hold on to checks they have deposited using RDC but there are benefits to not destroying the check too quickly. For example, the original may be requested if the amount on the digital deposit does not match the amount on the written check.
Meanwhile, for the US market, new card technology may lead to yet more check fraud.
“Well before the EMV card liability shift occurs in the US (October 1, 2015), a number of financial institutions have reported a marked increase in counterfeit checks and duplicate-item fraud, usually by way of the mobile deposit capture service,” wrote David Lott, a payments risk expert at the Atlanta Fed’s Retail Payments Risk Forum.
He explains that this is all part of a wider pattern of fraudulent activity, as technology like EMV forces criminals to find weak spots to target. For instance, Lott says Canadian financial institutions saw a 300 percent increase in fraudulent applications for credit and checking accounts since its’ EMV liability shift.
Experience suggests that when one avenue of fraud is cut off, the criminals simply look to another method. If EMV cuts counterfeiting, fraudsters will look to checks and whatever vulnerabilities that exist in this channel.
As Lott argues, tackling fraud requires “consistent, equal pressure” on all fronts, including checks and mobile RDC.
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