What Small Business Owners Need to Know About Check Fraud

Check fraud is a troubling threat to small businesses. Despite the rise of digital payment methods, checks remain a common target for fraudsters or scammers. According to the American Bankers Association, a substantial portion of B2B transactions still rely on paper checks, making them an attractive opportunity for criminals employing both traditional and sophisticated fraud techniques. 

Check fraud is a complex crime that thrives on deception and exploitation of vulnerabilities in our financial system.  

Fraudsters often establish networks of fake bank accounts, steal personal information, and acquire checks through various means, including purchasing stolen or counterfeit checks on the black market or stealing mail. Once they have the checks, they use techniques like "washing" the ink off stolen checks to rewrite them with new payee information and inflated amounts. 

The consequences of check fraud can be devastating for small businesses.  

Financial losses, reputational damage, and disrupted customer service are just a few of the potential impacts. When customers fall victim to fraudulent check activity, it erodes their trust and affinity for brands that cannot provide a safe transactional environment. 

Is check fraud on the rise? Here are some statistics.  

79% of organizations reported check-related fraud attacks in 2024. The Association for Financial Professionals (AFP) highlighted that check fraud has become more democratized, with fraudsters openly sharing techniques on social media and messaging platforms. Additionally, 80% of financial institutions have expressed concern over the increase in check fraud. 

To protect your business from the rising threat of check fraud, consider adopting the following alternatives: 

1. Digital Payment Methods: Embrace digital payment methods such as direct deposit, digital wallets, and peer-to-peer payment apps. These methods are not only more secure but also more convenient for both you and your customers. 

2. Automated Clearing House (ACH) Payments: ACH payments are electronic payments that go through the Automated Clearing House network. They are a secure and efficient way to transfer funds between bank accounts without the need for paper checks. 

3. Credit and Debit Card Payments: Accepting credit and debit card payments can reduce the risk of check fraud. These transactions are processed electronically and come with built-in fraud protection measures. 

4. Online Invoicing and Payment Platforms: Utilize online invoicing and payment platforms that offer secure payment processing and fraud detection features. These platforms can streamline your payment processes and provide an added layer of security. 

As check fraud continues to rise, it's crucial for small business owners to stay vigilant and adopt secure payment methods.  

By embracing digital payment solutions and leveraging technology-driven fraud prevention measures, you can protect your business from financial losses and maintain the trust of your customers. For the times when you do need to write checks, add positive pay services to your business account and/or regularly look at the checks clearing your bank account to ensure they match the amounts and the name that you recorded on your books for the payment. 

Need help figuring out and implementing the solutions that are best for your business? Reach out to us today.