Omnichannel banking is the newest strategy that is becoming imperative for financial institutions to adopt in an effort to remain competitive and increase their profit margin. In its simplest form, omnichannel banking involves enabling customers to engage with their bank using their preferred method, whether through mobile, online, or in-person channels.
Although integrating an omnichannel experience for consumers can set a bank on the fast track to increased customer satisfaction and profitability, it has also opened the door to bad actors who are ready to leverage these new points of entry for attack. An Early Warning report, Fraudsters Love Your Omni-Channel Approach, gives an in-depth look at what fraudsters have identified as the weakest links to exploit consumers and financial institutions, as well as offering a solution to what is known as deposit fraud.
What is Deposit Fraud?
With deposit fraud, a criminal uses a deposit to scam banks or consumers and get unauthorized access to funds. Deposit fraud scams can take on two forms. An overpayment scam happens when a buyer erroneously sends a check that exceeds the expected payment. Then the scammer will ask the victim to return the overpayment. Later, the FI discovers that the check is fraudulent, and the bank customer is then expected to pay the full amount back. Placing a banking customer on the hook for a fraudulent check is certainly not the best tactic for FIs to draw and retain loyal customers.
With banking becoming increasingly digital, remote deposit capture (RDC) has also become a favorite tactic for fraudsters to use. Here, a fraudster would make a check deposit several times, at various banks, using RDC. Most FIs don’t have access to real-time data and therefore cannot communicate with each other in a timely manner to avoid this deposit from taking place multiple times. The nature of RDC is that the customer doesn’t have to be physically present, making identification impossible for tellers.
Businesses have become popular targets of deposit fraud as well. ACH fraud and deposit fraud are seeing steady climbs in crimes using large business checks. According to an AFP study1 , two-thirds of businesses were affected by fraud in 2021. Furthermore, fraud activity involving ACH debits is climbing, having affected 33% of businesses in 2019, 34% in 2020, and 37% in 2021.
How FIs Can Mitigate Deposit Fraud
Fraudsters quickly adapt as banks continue to innovate their processes. Early Warning’s Verify Deposit solution offers the data insights a financial institution needs to make a decision about the possibility fraud is occurring in real time.
Verify Deposit utilizes data that has been contributed by thousands of FIs to the National Shared Database. This solution analyzes millions of daily transactions, delivering comprehensive insights and equipping FIs to determine transactional risk with the highest levels of accuracy.
Verify Deposit can also be used to speed up funds availability and stop deposit fraud across all channels. Also, when a demand deposit account or DDA is first opened, Account Owner Authentication confirms that the external account is owned by the customer seeking to make a deposit. Verify Deposit then confirms the status of the account and can indicate whether the item will be returned unpaid. All of these processes can be performed in a matter of seconds.
Other ways that banks can mitigate fraud include:
- With the teller: Detecting deposit fraud attempts can be tricky with continual teller turnover, making it difficult for banks to efficiently train their tellers to detect this type of fraud. Therefore, by offering a real-time deposit screening tool, tellers would have the information they need instantly to detect fraudulent checks and deposits.
- At the ATM: More customers than ever are using ATMs to make their deposits. By using predictive intelligence, FIs can prevent duplicate or counterfeit check deposits in real time.
- Remote deposit capture: For FIs that offer a mobile banking app, RDC has become a weak link for deposit fraud. By using Verify Deposit, FIs can detect and stop deposit fraud directly on the app.
Banks Need to Tackle Deposit Fraud Head-On
Fraudsters have always been on the cutting edge of new technology, ready to exploit any vulnerabilities that an organization may have. Unfortunately, it is a never-ending marathon of vigilance and mitigation, one that FIs should never allow to go unresolved.
With Early Warning’s Verify Deposit solution, banks will now have access to real-time data intelligence that can help detect and stop fraudsters in their tracks, enabling transactions only from the customers they can trust.
1 AFP® Payments Fraud and Control Report, Association for Financial Professionals, 2022
