Interactive Teller Machines Show Potential Growth for Fraud, Study Shows
"As new ITMs roll out across the U.S., it should come as no surprise that they will also be targeted by fraudsters."
Interactive teller machines, seen as a solution for financial institutions looking to expand banking hours and their geographical footprint, are increasingly a fraud target as new U.S. ITMs roll out.
The High Point, N.C-based Advanced Fraud Solutions, which provides deposit fraud detection software, in a new report, “Guide to Securing ITMs from Fraudulent Deposits,” detailed ITM benefits for both financial institutions and consumers; their risks and targeting by fraudulent actors; and best practices for credit unions and banks toward ITM deposit security.
“Consumer adoption and fraud typically coincide,” Lawrence Reaves, president/CEO of AFS, said. “As new ITMs roll out across the U.S., it should come as no surprise that they will also be targeted by fraudsters.”
AFS reported credit unions have started deploying ITMs to provide members with a 24-7, on-demand banking experience. Since their introduction in 2011, ITM adoption has steadily grown. ITMs allow financial institutions to provide customers with all of the necessary banking functions – including account opening, face-to-face teller experience, etc. – without the need for tellers to be physically present.
ITMs offer a variety of self-service options broken down into two categories: The ability to execute disbursement transactions such as depositing checks, withdrawing cash funds, initiating new accounts and fulfilling loan payments; and communication directly with a teller via video conference.
The AFS study did state consumers still expect in-person interactions. “According to an ATM Marketplace survey, 64% of consumers prefer the traditional teller window to a fully-automated ATM interaction with no human contact.” It added, over the next few years, to stay competitive, financial institutions will need to be flexible in order to accommodate the diverse needs and expectations of both younger and older consumers.
As recently as 2018, check usage, still a popular payment method for commercial transactions, took part in some 40% of B2B transactions, according to an Association for Finance Professionals 2019 payments survey. The FBI also reported check fraud in 2018 racked up more than $18 billion in losses in the U.S. and hit about 70% of all organizations in the country.
The AFS white paper also pointed out fraudsters will be quick to test and take advantage of any potential weaknesses in ITMs. AFS suggested in addition to developing a sound operational strategy for rolling out ITMS, credit unions and banks should also consider likely fraud scenarios. As with any new banking solution (most recently, for example, mobile deposits), fraudsters are quick to look for ways to take advantage of newly acquired technology. Particularly low-technology, easy to execute forms of fraud like check fraud continue to be a pervasive issue. Because paper checks contain loads of information and are more easily forgeable and stolen, they make it easier to commit fraud.
The AFS white paper offered ways to mitigate potential ITM-initiated check fraud losses:
- Add real-time assessments. By evaluating check deposits made through ITMs in real-time, credit unions and banks can quickly assess risk and stop potentially fraudulent items before a loss can occur.
- Access better data. Financial institutions should leverage the best, most up-to-date fraud data (especially from outside sources) to properly assess risk. By tapping into a nationwide fraud database with thousands of contributing members, financial institutions gain better insight into a check deposit’s funding account, including known counterfeits, insufficient funds alerts, closed accounts, duplicates and other fraudulent items.
Advanced Fraud Solutions offers TrueChecks, a check fraud prevention solution, which uses a private cloud-based check fraud database to triangulate and assess potentially fake items.