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Downscaling Fraud – Moving Away From Paper to Online Payments

December 24, 2013

Downscaling Fraud – Moving Away From Paper to Online Payments

December 24, 2013

As we look around the payment landscape, we see a far different world than we did ten, even five years ago. The amount and pervasiveness of technology have not only made it easier for people around the world to participate in global commerce, it’s made the world of commerce and e-commerce safer for all of us. One of the ways in which the payment landscape is becoming safer includes the gradual shift away from paper payments – or, more commonly, checks.

Checks have been, and continue to be, one of the most frequently targeted (and successful) payment methods by those perpetrating payment fraud. However, with the growth in payment technology comes a decrease in the number of checks being used in payments – meaning less opportunity for fraud to occur.

The 2013 Electronic Payments Survey, underwritten by J.P. Morgan and published by the Association for Financial Professionals, found that fraud has declined for yet another year in the U.S. and that this shift isn’t necessarily due to advancements in technology, but to the decreased use in checks.

The survey highlighted a number of check and fraud-related trends that are of great importance in the payment world. Among them:

Sixty-one percent of reporting organizations experienced some sort of fraud (attempted or successful) in 2012 – down slightly (5%) from 2011 and 2010 (10%). However, the frequency of fraud occurrences was higher in 2012 than was reported in the first AFP survey in 2005. During that time period, fraud was occurring at a rate of 55 percent.

Checks are still a popular vehicle and target among fraud perpetrators. 87 percent of respondents to the AFP survey stated as such, followed by corporate purchase cards as a distant second (29 percent). And those who were victims of the fraud weren’t likely to experience any financial loss – thanks in part to safeguards in place. On the flip side, 38 percent of organizations that did experience fraud in 2012 experienced losses up to $250,000 and 18 percent experienced losses of more than $250,000, showing us that fraud, when it does happen, is always costly for corporations.

Checks accounted for the greatest fraud-related financial loss. Of the corporations that reported incurring a financial loss from payment fraud, 69 percent reported that loss was the result of check fraud, up from 60 percent in 2011. Corporate payment card fraud was a distant second as a cause of financial loss (10 percent), followed by ACH debits at under 10 percent.

Electronic payments are up. Check use is decreasing. In fact, 84 percent of the AFP respondents said that the decrease in check use was the most significant trend in payments activity for business along with a corresponding rise in electronic payments. Other trends the AFP survey uncovered include increases in B2B payments, international operations – especially between large organizations and those with high volumes/dollar mounts of non-U.S. transactions – and mobile and alternative or emerging payment options.

AFP Survey Takeaway

The AFP survey is a great tool for staying on top of current payment processing and fraud trends. Even as we see a decrease in the use of checks correlated with a decrease in check fraud, there’s no denying that fraud remains high in other areas of the payment world. Perpetrators of fraud are evolving – there’s no doubt about that. Staying ahead of them by using only the most secure technology and methods, and arming ourselves with up-to-date and accurate information will help keep fraud in check.


Eran Feinstein is the founder of Direct Pay Online. Direct Pay Online provides global e-commerce and online payments solutions for the travel and related industries  He is a leading authority in the fields of e-commerce, travel and payments, having acquired extensive experience from various parts of the world.

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