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Those of you who regularly read my columns know I'm a
Insider’sreport champion of checks. My admiration for the check payment
system, however, isn't because I'm old school. (Although I
on payments am a baby boomer.) It has much more to do with the tech-
nology and other efficiencies that have been introduced to
the check system over the past few decades.
Thanks to the rise of image exchanges and remote deposit
capture (RDC), most checks today clear as electronic im-
ages – better than 99 percent, by the Fed's reckoning. As a
result they clear faster than ever before – usually in a day
Electronic payments or two, and it's not unheard for RDC or mobile RDC depos-
its to clear on a same-day basis. This, in turn, allows banks
grow, as do fraud rates to identify fraudulent items before having to make deposits
available for withdrawal.

By Patti Murphy The impact of those changes on check fraud has been no-
table: in 2015 banks sustained $710 million in check fraud
ProScribes Inc. losses, down from $1.1 billion in 2012. In 2012 check fraud
made up 2.8 percent of all fraudulent noncash transactions
lectronic payments are growing at a rapid clip; and 18.2 percent of total dollars lost. By 2015 checks ac-
so, too, is electronic payments fraud. These are counted for just 0.9 percent of all fraudulent noncash pay-
two key takeaways from a new report from the ments and 8.6 percent of total dollars lost to fraud, accord-
E Federal Reserve Board. While data in the report ing to the Fed's latest analysis.
may be dated, the trends seem clear.
Another factor contributing to falling check fraud losses
The report, which draws on data from the Federal Reserve is that while consumer check writing is down, businesses
Payments Study, reveals that between 2012 and 2015 total continue to write a lot of checks, the Fed report noted. Busi-
noncash payments grew by 12 percent, from $161.2 trillion ness, particularly large companies, employ sophisticated
to $180.3 trillion. Also during that three-year period, the fraud detection tools (like positive pay) that allow them to
total value of fraud involving noncash payments grew by review checks presented to their banks for collection and
37 percent, from $6.1 billion to $8.3 billion. And most of proactively approve or reject them for payment.
those losses were tied to debit and credit cards, according
to Changes in U.S. Payments Fraud from 2012 to 2016: Evidence ACH fraud and losses also tumbled between 2012 and 2015.
from the Federal Reserve Payments Study. ACH fraud, by value, fell from 17.2 percent of the total non-
cash fraud pie in 2012 to 14 percent in 2015. ACH fraud fell
The Fed embarks on a massive data collection effort from 5 percent of all noncash payment fraud in 2012 to 1.3
every three years to gauge trends in noncash payments percent in 2015.
– automated clearing house (ACH), cards and checks –
and publishes aggregate estimates in the Federal Reserve Drilling down on card fraud
Payments Study. The most recent study, published in 2016,
draws on 2015 data provided by financial institutions. Between 2012 and 2015, credit and debit card fraud grew,
both in terms of sheer number of incidents and total losses,
In addition to the triennial study, the aggregate data also is and individually each exceeded losses due to either ACH or
used by economists and research analysts at the Fed Board check fraud. Credit card fraud losses, alone, totaled more
and the Reserve Banks to preparing reports analyzing than twice the combined value of ACH and check fraud
payment trends. Changes in U.S. Payments Fraud from 2012 losses, the Fed said.
to 2016: Evidence from the Federal Reserve Payments Study, the The Fed's data, which reflects fraud experiences prior to the
most recent of these reports, was released by the Fed Board initial 2016 EMV liability shift, found the highest rates of
in October. credit card fraud in 2015 were in card-present transactions:
14.27 basis points by value of losses and 7.32 basis points
Check, ACH frauds down by number of fraudulent transactions. These represent
increases of 5.34 basis points and 3.41 basis points,
Overall, fraud involving noncash payments amounted to respectively, over card-present fraud rates in 2012, the Fed
an estimated 45 cents for every $10,000 in payments in 2015; said.
that was up from 38 cents per $10,000 three years earlier.
And nearly all the losses came from card transactions. The The EMV liability shift, which took hold for most merchant
majority of good transactions (97.6 percent by value) were categories in October 2016, has prompted a majority of brick-
processed through the ACH and check systems, the report and-mortar merchants to install EMV-compliant terminals
revealed. lest they be held liable for losses from fraudulent cards. The

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