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Early Warning Offers New Solutions to Help Contain Electronic Banking Fraud

The use of automated clearing house (ACH) payments continues to climb. Last year, there were more than 12 billion non-check ACH transactions, which marked a 4.15 percent bump from the previous year. And NACHA, the electronic payment association, believes the number of ACH transactions will only increase in the years to come.¹

Along with that increase there will also be an increase in the potential for ACH fraud. According to the FBI, ACH fraud cost financial institutions and businesses $100 million in 2009.² But there is another staggering cost as well: lost customers. According to one study, 28 percent of consumers said they switched banks after being victims of checking or savings account transfer fraud.³

In an effort to help financial services organizations (FSOs) curtail the rising costs of ACH fraud and other forms of electronic payments fraud, Early Warning continues to enhance its deposit and payment solutions to reduce vulnerabilities within the electronic payment systems. This helps reduce the cost of fraud. It also helps to enhance customer service since Early Warning’s research suggests that knowledge of suspect deposit items can improve the teller line experience.

In recent months, Early Warning has introduced three enhancements to its DEPOSIT CHEK® and PAYMENT CHEK® services — Scored Accounts 3.0, the Account Owner Authentication GUI and Release 28 — aimed at helping to contain electronic banking fraud.

In its newest incarnation, Scored Accounts 3.0 includes ACH transaction data contributed by non-participating FSOs from across the country. This additional data provides participating FSOs with an expanded, industry-wide view of transaction activity to help better identify suspicious deposit and payment behavior.

Early Warning customers who contribute data and take advantage of the ACH enhancement can expect to see a significant increase in their Scored Account hard-hit warnings. They will also see more accurate scoring on accounts with limited check volumes, improved quality on non-participant account risk-modeling and scoring as well as more precise overall scores, since modeling is now based on additional historical data and an increased number of accounts.

Earlier this year, Early Warning introduced the Account Owner Authentication Graphical User Interface, or AOA GUI, which is a browser-based access method that provides a quicker and easier method for fraud analysts to confirm account statuses and ownership. The new technology is designed to help FSOs confirm that ACH transactions —including TEL transactions (telephone-based authorizations for debits) and WEB transactions (Internet-initiated transactions) — have been initiated by the actual authorized account holders.

Early Warning also recently introduced Release 28 to address challenges in online new account openings.

Since a significant percentage of online new-account fraud (and ACH fraud) begins with funding from savings accounts, Release 28 includes the ability for FSOs to verify the status of non-draftable savings accounts.

Early Warning is also researching Release 28’s potential as a solution to the problem of remote deposit capture (RDC) fraud. RDC technology has become a popular choice for today’s banking customer, allowing them to deposit items from their home and office or mobile device. However, like many technological advances, it comes with its own unique fraud vulnerabilities, namely the possibility for duplicate deposits. The deposit channel flags in Release 28 that now indicate ATM, teller and RDC deposits may also be applied to notifications of possible duplicate deposit risk in future enhancements.

All three of these new augmentations — Scored Accounts 3.0, the AOA GUI and Release 28 — were created to help FSOs better contend with ever-more sophisticated methods of electronic fraud. Contact your Early Warning representative for further information on how these enhancements may benefit your organization.

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1. NACHA, April 7, 2009.
2. FBI, November 3, 2009
3. Gartner, Inc. 2009