Check fraud remains a significant concern for businesses of all sizes in the United States, with recent data indicating a troubling upward trend. According to Thomson Reuters, suspicious activity reports (SARs) related to check fraud have seen a dramatic increase in recent years. While there was a slight decline in 2023, the numbers remain alarmingly high compared to pre-2021 levels.
Prior to 2021, check fraud accounted for approximately 250,000 SARs annually. However, this figure surged to over 350,000 in 2021 and nearly doubled to 683,000 in 2022. Although 2023 saw a minor decrease to 665,505 reports, Jacob Denman, a risk and fraud product manager at Thomson Reuters, describes these numbers as “shocking.” Check fraud now represents almost 20% of all SARs filed.
The rise in check fraud has led some businesses to cease accepting checks altogether. Major retailers like Target, Whole Foods, and Aldi have implemented policies to no longer accept checks as payment in their stores. However, for many small businesses, particularly those in service industries like contracting, eliminating check payments isn’t a viable option.
Chris Wong from Bank of America outlines three primary types of check fraud: identity theft, fraudulent fund transfers, and check
duplication. These methods have become more sophisticated due to advancements in technology and increased access to digital tools by criminals.
Small businesses are particularly vulnerable to check fraud. Scott Regan, COO of RenewalMD, a medical practice in Georgia, shared his company’s experience with financial fraud when someone from another state used their routing and account numbers to write fraudulent checks. Similarly, Adam Rizza, president of Sunscape Eyewear in California, reported instances of checks being stolen from vendors’ mailboxes and subsequently duplicated for fraudulent deposits.
Beyond fraud, checks present other challenges for businesses. Irana Wasti, chief product officer at BILL, points out that checks take longer to clear, require more manual work, and can create security risks due to the inclusion of banking information on the physical check.
To mitigate these risks, experts recommend transitioning to digital payment methods. Bank of America’s Wong suggests that modern digital payments offer stronger cybersecurity measures and real-time balance information. He advises businesses to enable transaction alerts to track account activity and prevent fraudulent charges.
Alternative payment options for businesses include credit cards and ACH (Automated Clearing House) payments. Credit cards are particularly popular among consumers, with Capital One Shopping reporting that 62.6% of all retail purchases are made using credit cards. For B2B transactions, both credit cards and ACH payments provide secure alternatives to checks.
When considering new payment methods, PCMag.com advises small businesses to focus on finding the right combination of solutions that work best for their current needs while maintaining flexibility for future payment opportunities.
By embracing digital transactions and secure payment gateways, small businesses can reduce the risk of fraud, improve efficiency, and enhance customer satisfaction. These modern payment solutions not only simplify transactions but also help build trust and loyalty with customers and vendors.
As check fraud continues to pose a significant threat, it’s crucial for small businesses to prioritize secure and efficient payment alternatives. By doing so, they can protect themselves from financial losses and streamline their operations in an increasingly digital business landscape.