If you've read The Green Sheet, Inc.'s 1997 Check Study, you know that more than 60 billion checks are written in the U.S. each year. You may also know that 1.2 million of those checks go bad.
According to Brian Satisky, president of the Maryland Check Cashers Association, "As FBI statistics clearly indicate, the volume of check fraud and the magnitude of the dollar losses involved increased dramatically during the past several years."
According to the FBI, check fraud is changing. Due to relatively inexpensive new technologies such as printers and scanners, more than 50% of check fraud crimes are now committed by professional organizations.
Industry members believe Congress has exacerbated the problem. They feel when Congress required bank's to process checks within 72 hours (so consumers could have access to their money faster) they inhibited the banks' ability to confirm that checks are real.
Given the growth of fraud, traditional Check Guarantee companies are beginning to push more "authorization services" coupled with back-end "collection services," to create elements that tend to look like "Guarantee," but function so they put the risk of collection back on the retail customer.
While fraud continues to grow, and price pressure on Guarantee service continues downward, new services are being created to provide more information to retailers while leaving the burden of loss squarely on their shoulders.
Case in point: Deluxe Corp. (owners of SCAN), Fair, Isaac & Co. (a credit scoring company), and Acxiom Corp. (a data warehouse) have joined forces to create, among other things, a check scoring system that will be made available to retailers to determine if a check should be accepted based on a "credit" score.
Understanding from a consumer's point-of-view that declines for previous bad check history are difficult to accept, the results of past debit or credit history will be equally, if not more, upsetting. Consumer advocates are worried that mistakes in credit records will become even more of a threat to an individual's privacy and financial well being.
While large retailers (high volume, low ticket) who have been traditional users of verification services may find check scoring a nice addition to the verification services of companies such as Deluxe, ECP is just as likely to take a bite, perhaps even a big one, from this business initiative.
On the flip side, small- and mid-sized retail (low volume, high ticket) and high risk check segments which aren't usually verification users may find check scoring or ECP are new ways to decline much needed sales.
