Check fraud continues to be the top source of fraud in the United States, year after year. Yet many businesses continue to use them, particularly for B2B payments. Why is that?

During a meeting earlier this year with the Business Payments Coalition (BPC), the group delved into check fraud. Participants agreed that many small and medium-sized business leaders in the U.S. still view checks as safer than other payment methods. Despite mountains of evidence that checks are, in fact, among the least secure payment methods available, the message simply isn’t getting through to a lot of organizations.

Simply put, if we truly want to eliminate check fraud, we need to change the messaging around it. 

Check Payments Remain a Massive Problem

The 2024 AFP Payments Fraud and Control Survey found that checks are the most susceptible payment method to fraud, with 65% of respondents reporting that their organizations experienced actual or attempted fraud via checks. AFP conducts this survey every year and checks always top this list.  

Amy Smith, AAP, SVP, Membership Services and Education for The Clearing House, noted that check fraud is higher than it's ever been when compared to the number of checks being written. And the average dollar value per check fraud incident is going up, indicating that criminals are targeting businesses more than consumers. “They are targeting businesses because they write bigger checks,” she said.

Yet 70% of check users who responded to the 2024 AFP survey said they have no plans to discontinue check payments. In other words, even many companies that understand the fraud threat posed by checks choose to endure it.

Perhaps the problem is the fear of the unknown. Everyone knows check fraud is out there, but companies feel they can manage it with the help of positive pay, reverse positive pay, etc. But what about the other threats?

Media reports on every major data breach out there. We know all the big ones, whether they result in payments fraud or not — Yahoo, Target, Home Depot, Heartland, the Office of Personnel Management, etc. 

Business email compromise (BEC) scams have also garnered widespread attention. These schemes are even more troubling now, as criminals can use AI and deep-fake technology to make them even more difficult to identify and prevent.

Due to media attention, businesses that perhaps already aren’t well-versed in payment technology fear modern and emerging payment methods. They feel that they’ll just stick with checks because at least they know how to protect themselves against that threat.

Embracing Modern Payment Methods

Businesses need to understand that fraudsters will continue to target all payment types, as no payment method is 100% secure. However, to keep pace with the modern world, companies need to accept payments by card, ACH, wire, RTP, FedNow, etc. Most companies already use some or all of these payment methods in some capacity, even if they still accept checks. So why would an organization not want to eliminate the most inefficient, costly, fraud-prone method so it can focus its efforts on securing other payment channels?

Digital payments are here to stay, quite obviously, and they will continue to evolve. As more instant payment methods and other innovations emerge, your organization will eventually consider adopting these methods if it hasn’t already. The threats to those new methods won’t cease, and you’ll have to focus fraud prevention efforts on them. That’s why it’s critical to stop using checks.

Checks might be easy to understand and use, but they’re also easy for fraudsters to exploit. As security protections for other payment methods have increased, some fraudsters are resorting back to old methods. Both AFP research and the FBI have identified an alarming trend of criminals stealing checks out of mailboxes and blue collection boxes and altering them or using them to create counterfeit checks. With the U.S. Postal Service likely to cut around 10,000 jobs, mailed checks could spend even more time in transit, giving criminals even more chances to steal them.

Taking Action

For the United States to truly move the needle and catch up to other regions like the EU and severely diminish check usage, all players will have to participate. That will mean drastic changes.

On the surface, moving all check payments to ACH sounds like the most logical step for a company. However, setting up ACH payments can be difficult, particularly for smaller businesses, noted Lee-Ann Perkins, CTP, Assistant Treasurer and Senior Director for Ankura. 

“People cling to the ease of checks,” she said. “If you’re a small business, your bank immediately sets you up with wire access and even RTP or Zelle. However, you're not set up with an ACH platform.

“So, if you don't know anything about finance, and you can send money through a check, wire or Zelle, how would you even know about ACH? And even if you did, why are you going to spend more money to set up another platform that you don't know how to use? It’s not intuitive for small businesses.”

Even for medium-sized or larger companies, setting up ACH payments can be challenging. Perkins noted that if treasury opens a new account, it often has to set up ACH initiation capabilities with its banking platform. — it doesn’t automatically default to it. “ACH should be defaulted as much as wire is,” she said.

Once organizations get over the hurdle of setting up ACH payments, they will likely discover many benefits. “ACH payments enable businesses of all sizes to streamline payment processes, reduce the risk of fraud and eliminate delays,” a Nacha spokesperson said. “Nacha provides businesses with tools to ask their financial institutions the right questions, helping them leverage the ACH Network for seamless payroll, B2B and consumer payments while reducing reliance on paper checks and their associated challenges.”

Perkins puts the onus on banks to make it more difficult for companies and consumers to use checks. She believes banks should sunset remote deposit and lockboxes and make it as inconvenient as possible for checks to be deposited. While that might be frustrating for check users, it would certainly persuade them to find a new form of payment.

Amy Smith of The Clearing House attended a recent meeting on check fraud that included financial institutions, industry stakeholders and technology providers. Many attendees agreed that financial institutions are best positioned to help companies move to digital alternatives and can be joined by AP and AR platform providers in this endeavor. “Businesses not only need to hear it from their trusted financial institution, but also from whoever owns and manages the platform that they use for their accounting,” she said.

However, companies must be proactive as well. Smith urges organizations to have serious conversations with their banking partners now about alternative payment methods. “A lot of small to medium-sized businesses are being managed out of a branch where true treasury management services and tools are made available. The company has to go to that branch and say, ‘I want to get off of checks.’ And you know what? If their current banking partner is unable to support this goal, start talking to those who can and will,” she said.