Electronic Payments More Secure Alternative to Paper Checks

For most organizations, electronic payments are the norm. Technology has made transactions among businesses smarter, faster, more cost efficient, and more secure for all parties involved. Nevertheless, paper checks still continue to be widely used in B2B transactions, a stubborn reminder of how sticky legacy systems can be. There are many reasons for this; viable commercial businesses need to be able to support a wide range of transaction types from a wide range of parties large and small, sophisticated and not. Plus, not all businesses are able to move at the same pace when it comes to full scale digital transformation.

Whatever the reason, paper checks are still a reality for many, often existing side-by-side with more automated processes. This presents a unique vulnerability for companies who, while rightfully focused on cybersecurity, may not understand or even realize the risks posed by the humble paper check. This has created a timely opportunity for fraudsters, who are increasingly taking advantage of a frequently forgotten and overlooked area of payments to engage in activities that can have extremely damaging consequences.

A $24 billion industry

With a significant volume of business checks still being transacted, losses to check fraud are on the rise. Experts predict totals will surpass $24 billion in 2024 with incremental costs being even higher.1 For example, check fraud damages usually do not account for potentially lost future financial opportunities (like downgraded credit ratings as a result of subsequent media reports). Non-financial repercussions, such as reputational damage can also occur, which carries heavy implications for stakeholders at levels of the business. Customers may leave, as may employees – specifically those whose responsibility is to manage fraud. Vendors may question the company’s current and future ability to pay, and potential business partners might hesitate to do business with a company perceived to be weak on financial security. What’s more, the FDIC only covers bank failures. The agency does not protect companies against fraud or theft losses.

For businesses that do rely on paper checks, the need outweighs the risk. In a recent Association for Finance Professionals study, 65% of respondents reported they were victims of check fraud but, surprisingly, 70% have no plans to eliminate check writing.2 It is important that companies who use paper checks learn to identify and guard against would-be scammers.

Know the scams

Fraudsters see checks as a lucrative enterprise. “An account can be victimized through different channels as the result of one stolen check,” says Enrique Fernandez, director of Financial Intelligence, Synovus Financial Crimes Unit.3 These criminals steal and misuse checks in multiple ways – three of the most common include check kiting, forgery, and counterfeit checks.

The data that can be lifted from a check is often perceived as more valuable than the document itself. “Thieves will pay for the information that the check bears: name, account, payee, sequence number and the amount,” Fernandez said. “That positions them to either create a counterfeit check payable to someone else, leaving the amount and check number as is, or empowers them to go in and commit [account] fraud.”4

Consider more secure payment methods.

The good news is that more and more businesses are realizing the value and relative safety of automated payment options.  While the Fed collected 3.1 million paper checks in 2023, this represents a steady decline (6.7%) from the previous year—evidence that a full scale move away from paper is happening, albeit slowly5.

According to Laura McGortey, Director of Treasury Payment Solutions at Synovus, payments platforms have evolved so much in recent years that businesses, in some cases need only click a few buttons to get a full scale payments platform up and running. Pre-integrations with top Enterprise Resource Platforms or Accounting Applications are becoming more the norm. Gone are the days of lengthy API integrations and costly upgrades that defined the early years of the e-commerce boom.

McGortey also notes that electronic alternatives to paper checks, particularly accessed via digital commercial banking, offer more security and a comprehensive range of services. These solutions can readily enable electronic payment options such as:

• ACH transactions.

  Automated Clearing House transfers are made electronically between financial institutions for debit and credit transactions. For example, debits include withdrawals, bill pay and are commonly used for recurring payments, while credits include payroll direct deposits. State-of-the-art payables solutions include multi-point payee verification and fraud checks before the first ACH payment is made and remove the burden of gathering, validating and maintaining payee ACH banking information.



• Wire transfers.

  For organizations engaging in high-value, time-sensitive transactions, wire transfers are a secure alternative to paper checks for transferring funds domestically and internationally. Additionally for businesses engaged in foreign exchange payments and trading, FX solutions integrated within digital commercial banking can make it easier to send and receive payments overseas regularly – offering conveniences and built-in safeguards.



• Commercial credit cards.

  Cards enable companies to quickly pay for purchases whether in person or online. They aren’t linked to checking accounts, are encrypted as part of chip technology, and carry less liability for theft than checks. For additional security, card account holders can freeze accounts, dispute transactions and receive fraud alerts. They may include corporate, fleet or purchasing cards and are also ideal for expense management.



• Virtual cards.

  This solution is typically embedded or included as part of a payer’s invoice payment process in the Accounts Payable function and allow payers to utilize a one-time use card number to pay vendors and suppliers.

Partner with a financial institution you can trust for check fraud protection.

Commercial banks are in a strong position to help their clients implement transactional platforms that meet their unique needs. In her work on the front lines of client payments, McGortey says that most businesses prefer to work with their bank directly on payments solutions, versus a third party fintech provider.

“Knowing and having that relationship with your banker is a quick path to resolution, because they know how you spend and they know you,” said Caleb Callahan, senior director, Synovus Financial Crime Unit.6

To learn more about check fraud solutions, complete this short form and a Synovus Treasury & Payment Solutions Consultant will contact you to discuss your payment processes and help identify potential optimization opportunities. You can also stop by one of our local branches.