Editor’s note: This column was included in the Feb. 13 version of The Pulse, a weekly BankBeat newsletter sent to subscribers.
There’s a postal crime wave going on in the United States. According to data from the U.S. Postal Inspection Service, mail theft complaints rose by more than 300 percent in the five year span leading up to 2023. During the same stretch, arrests for mail theft dropped 44 percent. In 2023, there were 600 reported cases of robbery against postal workers, along with 400 assaults, according to data provided by the U.S. Government Accountability Office.
This has contributed to what Russell Taylor, president of Finovifi, told me was “an unprecedented surge” in sophisticated check washing and fraudulent endorsements. I spoke to Taylor during my reporting for a check fraud story, which will be published in March. His insights, and comments from others, have led me to personally forgo paying invoices by check and prompted me to direct all members of my family to freeze their credit ASAP.
Going into my research, I wanted to believe that commercial banking clients had their payments processes better protected from potential check fraud than say your average consumer. Reading through court documents that detailed fraud schemes revealed otherwise. And then I came upon this LinkedIn post from Chris Nichols at SouthState Bank, which offers what I consider to be jaw-dropping numbers on the adoption rate of tools designed to protect businesses from check fraud, tools such as Positive Pay and ACH/wire. The sourcing and research methodology isn’t obvious, but still; even if these numbers were underreported by a lot, they would still be abysmal. And therein lies an opportunity.
Commercial clients – especially small businesses – need advice from their bankers on how to break their dependence on paying by check. They need to be nudged toward change, which is difficult for many. But the imperative is real.
Paul Benda, EVP for risk, fraud and cybersecurity at the American Bankers Association, told me Positive Pay is table stakes for banks, and bankers should focus on onboarding all of their customers to the tool — or tell those who refuse they need to indemnify the bank against future fraud losses.
At the same time, consider how commercial clients are served by your bank. Are only lenders reaching out? Are the conversations limited to credit needs? What’s the relationship between the credit team and treasury management when assessing how to deliver comprehensive services to business customers, for their own protection and yours? Are your people receiving the training they need to effectively build and retain the fee income that would result from higher adoption of these services?
Losses from fraud hurt everyone. Having the tools available and advertised on your website isn’t good enough. People need to understand why these tools should be used. And frankly, your own people need to know why their customers need these tools.
When I told my oldest son to freeze his credit, his immediate response was to ask “why?” Providing the answer was all he needed to act.