Time to ‘Stop Apologizing for Fraud Protection’

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When it comes to fraudsters, that old saying to "follow the money" clearly applies, because that's exactly what they do. And it helps explain why check fraud is rising, even as the shift to ACH business-to-business payments continues.

"The uncomfortable truth is checks persist because businesses still rely on them operationally. And fraud persists because fraud controls aren't universally adopted across those businesses," said Tim Kindschuh, Senior Manager, Product Management at Q2, a digital banking provider for banks, credit unions, and fintechs, which also provides fraud prevention products.

Q2 offers Centrix Positive Pay, an automated financial institution fraud prevention service that protects both check and ACH payments. For checks, it verifies issued items against a file provided by the business, flagging mismatches as exceptions before payment. For ACH, it provides monitoring, reporting, and controls to identify unauthorized or high-risk transactions. Together, these capabilities help ensure only authorized payments are processed. And while Positive Pay may seem like a no brainer, Kindschuh told Nacha's Payments SmartCast podcast that many financial institutions "sell Positive Pay reactively" after fraud happens, or only when a customer asks for it.

Jordan Bennett, Nacha Senior Director, ACH Network Risk Management, agreed, noting that "customers always seem to be very happy to get on to services after" something bad happens. "But that's the real challenge-trying to convince customers before an event happens that they need to do something."

Bennett said Nacha's Risk Management Advisory Group (RMAG) has talked about financial institutions making Positive Pay an "opt out" service, rather than "opt in," which Bennett called "a fantastic idea." Kindschuh said Q2 is starting to see more contracts which state that if the customer declines Positive Pay the business-not the bank-is on the hook for fraud.

Kindschuh believes financial institutions need to be proactive in getting customers on Positive Pay and helping them overcome any concerns about friction. Kindschuh believes sharing success stories could help, noting "it's not 'if' but 'when' that fraud is going to occur." But in the end, he said it's time to "stop apologizing for fraud protection."

"Businesses pay for insurance, security systems, compliance. This is no different."

Much more was discussed, and you can listen to the complete podcast below.