The 2011 AFP Payments Fraud and Control Survey, shows that despite advances in fraud protection and prevention in recent years, the rate of payments fraud attack remains stubbornly high. 71% of organizations experienced attempted or
actual payments fraud in 2010. 93% of organizations responding to the survey reported incidents of check fraud, up three percentage points above that reported in the 2009 survey. 14% of those organizations suffered a financial loss from check fraud (the typical
loss was $18,400). In comparison, the percentage of organizations affected by payments fraud via ACH credits was 4%.
It’s well recognized that electronic payments can offer organizations greater control and security, as well as reduced loss from fraud. While opportunities for fraud can arise with electronic payments, the potential risk is far greater with paper checks.
Electronic payments are subject to more immediate methods of payment verification and matching, and have less chance of being exposed to human error.They can also provide greater compliance capability in light of today’s strict regulatory environment.
Despite these well- known advantages, organizations continue to struggle with paper-to-electronic payment conversion, and for a variety of reasons. Whether due to corporate inertia, high implementation costs, or a lack of IT resources, paper checks still
dominate B2B payments. This time-consuming, inefficient practice becomes more expensive as the costs of postage, paper and supplies continue to rise. These factors combined with the financial loss from check fraud offer a compelling business case to accelerate
the migration to electronic payments.
With the massive effort that goes into issuing checks, many companies need to be reminded that the function is not core to their business. It is something that can be outsourced. Best practice outsourced payment solutions offer features that can reduce risk
from check fraud while providing a comprehensive integrated solution for check printing and delivery, and could help remove the traditional barriers that have blocked electronic payment adoption. In my next post, I will discuss some industry best practices
as they relate to efficient A/P processing and fraud reduction.
Has your company fallen victim to paper check fraud?