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How Can CUs and Small Businesses Fight Check Fraud?

More small turn to Positive Pay via the cloud.

October 23, 2012
KEYWORDS banking , fraud , technology
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Organizations may be losing as much as 5% of their annual revenues due to fraud, according to The American Institute of Certified Public Accountants.

While fraud affects businesses of all shapes and sizes, small businesses are disproportionately targeted and the most vulnerable to loss due to the expense  and lack of availability of fraud protection services.

To attract and retain small business customers, credit unions must strive to make fraud mitigation an affordable option—but first they must be able to afford it themselves.

Take it to the cloud
Positive Pay is one of the most effective fraud deterrents on the market. The technology validates a company’s payments prior to authorization by matching the account number, check number, and dollar amount of each check presented for payment against a list of checks previously authorized and issued by the company.

However, to offer Positive Pay as a service to businesses, credit unions must first absorb the substantial upfront costs of technology software and licensing. The cost is easy for big institutions to justify because they service a great number of large businesses that process a sizeable volume of checks.

Credit unions, however, have found it difficult to justify the upfront investment in Positive Pay because they serve a smaller number of businesses who have a lower price tolerance for fraud protection services.

Here, correspondent institutions can play a critical role. Because they serve a large number of credit union members, they can profit from investing in the latest Positive Pay technology and then facilitating its delivery downstream via the cloud.

Respondent institutions can then access and offer Positive Pay on a per-member basis with no up-front cost, enabling them to offer the service at a price their small business customers can afford. Everybody wins.

Next steps: Fraud and online payments

As banking continues to move into the online space, fraud activity is shifting from check forgery to electronic systems, including automated clearinghouse (ACH) processing.

While Positive Pay has been available for more than a decade to service fraud prevention needs related to hard checks— still a leading cause of fraud loss in the U.S.—the ability to use Positive Pay for ACH processing is a relatively new and promising option.

Positive Pay becomes even more valuable when it can address paper checks that have been converted to ACH. Because older check systems aren’t picking up inconsistencies that might occur from fraud in this transition, companies of all sizes are increasingly vulnerable when it comes to electronic fraud.

Credit unions that have Positive Pay systems designed to address this challenge will have a significant advantage over the competition in attracting and retaining business customers.

Offering fraud detection for small business customers also provides benefits for credit unions, including:

With growing globalization, more competitive markets, rapid developments in technology, and periods of economic difficulty, the risk of fraud will only continue to increase.

By creating a cloud-hosted and group-accessible option for fraud deterrent services, correspondent banks may hold the key to a much-needed small business solution.

SEAN PENNOCK is president/co-founder of Aptys Solutions, Rockwall, Texas. Contact him at 972-722-5400.

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Great article! Unfortunately, most employees don’t feel valued or appreciated by their supervisors or employers. In fact, research has shown that the predominant reason team members quit their jobs is because they don’t feel valued. This is in spite of the fact that employee recognition programs have proliferated in the workplace – over 90% of all organizations in the U.S. has some form of employee recognition activities in place. But most employee recognition programs are viewed with skepticism and cynicism – because they aren’t viewed as being genuine in their communication of appreciation. Getting the “employee of the month” award, receiving a certificate of recognition, or a “Way to go, team!” email just don’t get the job done. How do you communicate authentic appreciation? We have found people have different ways that they want to be shown appreciation, and if you don’t communicate in the language of appreciation important to them, you essentially “miss the mark”. Additionally, employees need to receive recognition more than once a year at their performance review. Otherwise, they view the praise as “going through the motions”. A third component of authentic appreciation is that the communication has to be about them personally – not the department, not their group, but something they did. Finally, they have to believe that you mean what you say. How you treat them has to match the words you use. If you are not sure how your team members want to be shown appreciation, the Motivating By Appreciation Inventory (www.appreciationatwork.com/assess) will identify the language of appreciation and specific actions preferred by each employee. You then can create a group profile for your team, so everyone knows how to encourage one another. Remember, employees want to know that they are valued for what they contribute to the success of the organization. And communicating authentic appreciation in the ways they desire it can make the difference between keeping your quality team members or having a negative work environment that everyone wants to leave. Paul White, Ph.D., is the co-author of The 5 Languages of Appreciation in the Workplace with Dr. Gary Chapman.

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