By Mary Schaeffer, courtesy of CPA Insider
Whether your smaller business makes payments electronically or not, it's still vulnerable to electronic payment fraud. You need to know how to protect your business' account. From tools to best practices, here's how:
Do you think that because you pay electronically your smaller business no longer has to worry about payment fraud? Or do you believe that just because your smaller business doesn't make payments electronically, you don't have to be concerned about electronic payment fraud? The reality is, if you answered yes to either of these statements your smaller business is in for a rude awakening.
Background
Electronic fraud covers both automatic clearinghouse (ACH) credits and debits. In fact, it's the debits that can cause the problem. With the right information, it's very easy to commit electronic payment fraud. And getting that requisite information isn't difficult. Luckily, for now, crooks have not caught on and they still focus primarily on check fraud. This is not to say that electronic payment fraud doesn't occur today. It most definitely does -- just not as frequently as check fraud.
Many smaller businesses don't take the appropriate steps to protect their bank accounts because they don't make electronic payments. This is a big mistake. Everyone is vulnerable, whether they make electronic payments or not.
Protecting Your Bank Accounts
Whether you make electronic payments or not, you can use the following tools to protect your accounts:
ACH blocks are the simplest of all the products to use. They allow companies to notify their banks that ACH debits should not be allowed on certain accounts. With a block in place, no ACH debit, even one that is authorized, will be able to get through on a given account. Everyone is advised to put blocks in place on all accounts where ACH activity is not likely to be used.
An ACH filter allows businesses to give their banks a list of companies authorized to debit their accounts. The banks will then "filter" incoming debits and allow through only those that are on the list submitted earlier. This filter does not check for dollar amounts or whether the particular transaction has been authorized, only that the company doing the debiting is on the approved list.
What About Positive Pay for ACH
A robust positive pay product for the ACH environment is not universally available today, but it's on its way. The issue is complicated because some banks match the identities of those attempting to debit an account with those on the list provided by the company, and exceptions are reported to the customer to review before payment. Only authorized electronic transactions are allowed to be withdrawn from your account.
Best Practices
Managing your bank accounts in an electronic payment environment requires special consideration. If you are using ACH blocks, keep track of which accounts you have put blocks on. Otherwise, you could end up with egg on your face when a vendor is given authorization to use an ACH debit and everyone has forgotten that a block was put on the account a year or two earlier. Many companies put ACH blocks on all accounts but one, thus enabling them to accommodate a few vendors that insisted on using an ACH debit.
In Conclusion
As payment activity moves away from paper checks and regulators work to make it harder for crooks to profit from check fraud, it's only a matter of time before the fraudsters focus on the ACH world. By putting the appropriate controls in place in your small or midsize business, these thieves will need to look elsewhere for a target to defraud.
Thursday, March 6, 2008
Manifest Destiny: Small Business Remote Deposit Capture
Report Published by Celent: Checks are central to small business finances and will remain so for the foreseeable future. However, meaningful adoption of RDC solutions by small businesses is inevitable. Highly predictable market forces will produce escalating competition as more deployers enter the market, driving down solution costs and spurring adoption.
Like the US North American expansion in the nineteenth century, remote deposit capture (RDC) is rapidly gaining territory. But just how far and how fast will it expand? In a new report, Manifest Destiny: Small Business Remote Deposit Capture, based on three separate quantitative surveys, Celent concludes that broad-based adoption by small and micro businesses (SMBs) is indeed the manifest destiny for RDC, and will come about in large measure over the next three years. Banks with large branch footprints have long had a stranglehold on small business financial services. For those willing to think and act differently, remote deposit capture will change that.
Although as many as 60% of US financial institutions have remote deposit solutions, two-thirds offer the same product to large and small businesses alike. But 30% of retail banks are planning separate remote deposit initiatives aimed specifically at small businesses. Historically, such initiatives have been rare, due to high solution cost and back office infrastructures that weren’t ready to efficiently process incoming check images. This trend should continue as a number of factors align to foster significant small business adoption through simultaneously improving client demand and eroding historic financial institution barriers.
“Two things jump out of this research,” says Bob Meara, author of the report and senior analyst with Celent’s Banking group. “The first is just how important checks are to small businesses. In our survey, checks represent 75% or more of total receivables for over two-thirds of small businesses. Second is the terrific opportunity for remote deposit among the smallest businesses, 20 million of them with annual revenues of less than US$1 million. Banks haven’t focused there yet, but new, low-cost scanners coupled with thin client applications will open up a whole new market for banks.”
This report begins by suggesting the manifest opportunity small business RDC represents as a vehicle for low cost deposit growth, particularly given today’s challenging lending and interest rate picture. The report also presents an overview of the small business landscape, highlighting the significant opportunity among businesses with revenues of less than US$1 million.
The report details the centrality of checks to SMBs, demonstrating RDC's tangible value both for customers and deploying financial institutions. It then offers a forecast for SMB RDC adoption along with key variables that will impact client adoption. Finally, the report presents a number of practical suggestions for seizing the SMB remote deposit opportunity based on interviews with highly effective financial institutions.
This 43-page report contains 33 figures and seven tables. It borrows from three separate surveys: one conducted among small businesses in June 2007, and two conducted among financial institutions conducted in June and December. Contact info@celent.com for more information.
Like the US North American expansion in the nineteenth century, remote deposit capture (RDC) is rapidly gaining territory. But just how far and how fast will it expand? In a new report, Manifest Destiny: Small Business Remote Deposit Capture, based on three separate quantitative surveys, Celent concludes that broad-based adoption by small and micro businesses (SMBs) is indeed the manifest destiny for RDC, and will come about in large measure over the next three years. Banks with large branch footprints have long had a stranglehold on small business financial services. For those willing to think and act differently, remote deposit capture will change that.
Although as many as 60% of US financial institutions have remote deposit solutions, two-thirds offer the same product to large and small businesses alike. But 30% of retail banks are planning separate remote deposit initiatives aimed specifically at small businesses. Historically, such initiatives have been rare, due to high solution cost and back office infrastructures that weren’t ready to efficiently process incoming check images. This trend should continue as a number of factors align to foster significant small business adoption through simultaneously improving client demand and eroding historic financial institution barriers.
“Two things jump out of this research,” says Bob Meara, author of the report and senior analyst with Celent’s Banking group. “The first is just how important checks are to small businesses. In our survey, checks represent 75% or more of total receivables for over two-thirds of small businesses. Second is the terrific opportunity for remote deposit among the smallest businesses, 20 million of them with annual revenues of less than US$1 million. Banks haven’t focused there yet, but new, low-cost scanners coupled with thin client applications will open up a whole new market for banks.”
This report begins by suggesting the manifest opportunity small business RDC represents as a vehicle for low cost deposit growth, particularly given today’s challenging lending and interest rate picture. The report also presents an overview of the small business landscape, highlighting the significant opportunity among businesses with revenues of less than US$1 million.
The report details the centrality of checks to SMBs, demonstrating RDC's tangible value both for customers and deploying financial institutions. It then offers a forecast for SMB RDC adoption along with key variables that will impact client adoption. Finally, the report presents a number of practical suggestions for seizing the SMB remote deposit opportunity based on interviews with highly effective financial institutions.
This 43-page report contains 33 figures and seven tables. It borrows from three separate surveys: one conducted among small businesses in June 2007, and two conducted among financial institutions conducted in June and December. Contact info@celent.com for more information.
Friday, February 22, 2008
Chicago Fed Conference - Payments Fraud: Perception versus Reality
The Federal Reserve Bank of Chicago has announced it will host its eighth payments conference, Payments Fraud: Perception versus Reality, June 5–6, 2008 at the Chicago Fed. The conference will highlight threats to the security of the payments system and explore solutions to those challenges.
Friday, February 15, 2008
Pew Study of Online Shopping
The Pew Internet & American Life Project has released a new report on online shopping - finding that Internet users like the convenience but worry about the security of their financial information. "Most online Americans view online shopping as a way to save time and a convenient way to buy products. At the same time, most internet users express discomfort over a key step in online shopping -- sending personal or credit card information over the internet."
Monday, February 11, 2008
Remote Deposit Capture
Soon you will be able to deposit checks by scanning them at home and sending them electronically to your bank. No need to visit a branch or even an ATM. This is possible because of the Check Clearing for the 21st Century Act, passed in 2003, which allows banks to exchange electronic images of checks. Already about half of all checks are scanned by businesses or the banks they are deposited into and not shipped in bags back to the banks on which they were drawn.
Fiserv, the big transaction services company, has announced new software that will enable banks to let home users deposit checks by scanning them. It already has a similar service for small and medium businesses. USAA, the financial services company that serves the military, has offered deposits through scanners for two years, but the idea has not yet caught on.
The technology has been debugged through several years of working with businesses, and meanwhile consumers increasingly have scanners at home, largely in the form of all-in-one printer units. To use the service, consumers would sign onto their bank’s Web site, activate a piece of software, type in the amount, and then scan the front and back side of each check they want to deposit. The bank has the option of immediately sending the check image to be cleared or to have a human review it first.
Some banks may charge an extra fee for this service, but others may give it free to customers.
Fraud, of course, is an issue. Where there are scanners, there may be Photoshop. And a scanner can’t detect all the anti-fraud features now built into paper checks, such as special stock and watermarks. Banking groups are developing new anti-fraud technologies that can be detected by scanners, but these have not been widely deployed. Unlike credit cards, which have strict federal anti-fraud rules, each bank sets its own policies for check fraud. Still, there are ways to combat fraud. Fiserv and others do have software meant to analyze images for signs of fakery. And there are other models that look for suspicious patterns of behavior that may indicate fraud.
In the electronic age, there really isn’t a need to use paper at all to get money from one bank’s computer to another bank’s computer.
Fiserv, the big transaction services company, has announced new software that will enable banks to let home users deposit checks by scanning them. It already has a similar service for small and medium businesses. USAA, the financial services company that serves the military, has offered deposits through scanners for two years, but the idea has not yet caught on.
The technology has been debugged through several years of working with businesses, and meanwhile consumers increasingly have scanners at home, largely in the form of all-in-one printer units. To use the service, consumers would sign onto their bank’s Web site, activate a piece of software, type in the amount, and then scan the front and back side of each check they want to deposit. The bank has the option of immediately sending the check image to be cleared or to have a human review it first.
Some banks may charge an extra fee for this service, but others may give it free to customers.
Fraud, of course, is an issue. Where there are scanners, there may be Photoshop. And a scanner can’t detect all the anti-fraud features now built into paper checks, such as special stock and watermarks. Banking groups are developing new anti-fraud technologies that can be detected by scanners, but these have not been widely deployed. Unlike credit cards, which have strict federal anti-fraud rules, each bank sets its own policies for check fraud. Still, there are ways to combat fraud. Fiserv and others do have software meant to analyze images for signs of fakery. And there are other models that look for suspicious patterns of behavior that may indicate fraud.
In the electronic age, there really isn’t a need to use paper at all to get money from one bank’s computer to another bank’s computer.
Friday, February 8, 2008
Gartner Says Consumers Prefer PIN-based Debit
Gartner has announced results of a survey of 4,500 online U.S. adults, conducted in August of 2007 that concludes that while banks and credit card issuers have put significant efforts into marketing contactless and signature-based debit card payments, they have failed to win over consumers. Gartner found that "consumers prefer alternative payment types that earn banks less revenue, but which consumers believe are more secure." In, particular, PIN-based debit and not signature debit. Gartner also found little consumer interest in contactless or mobile payments.
“Despite significant marketing campaigns by banks and card issuers to steer consumers towards using debit cards with a signature — ostensibly so that the banks can earn more interchange revenue — consumers prefer entering their personal identification number (PIN) to pay for groceries with their debit card over all types of signature-based card payments, whether credit or debit,” said Avivah Litan, vice president and distinguished analyst at Gartner.
“Banks promote signature-based debit payments because they earn more fee revenue from card-accepting merchants, on the premise that they are riskier and more prone to theft, so the banks need to earn higher fees to compensate,” Ms. Litan said. “Fraud rates on signature-based debit card payments are at least 10 times higher, and banks usually eat these costs if they are incurred in a card-present (or store) environment. Higher interchange fees paid by merchants to banks and card issuers for signature-based transactions must offset these costs or else banks wouldn’t promote the signature variety.”
When shopping at grocery stories, consumers prefer debit card payments that require entry of a PIN despite the fact that only debit and credit card payments with physically signed receipts typically earn them reward points. Consumers’ least-favorite payment type when shopping for groceries is contactless (wireless) payments, and there is similarly small interest in using mobile phones for making payments.
“Brick-and-mortar businesses who accept electronic consumer payments should promote use of PIN-based debit card payments by steering consumers to them through payment terminal programs and/or by offering store-based incentive programs,” Ms. Litan said. “Businesses pay less to banks for PIN-based payments and since consumers prefer them anyway, this is a win-win strategy for all parties except credit card issuers and banks.”
Consumers who have been affected by the data breaches publicized in recent years are more prone to change their online payment behavior than other online or offline activities, such as shopping and e-mail preferences. These consumers are more likely to call the online store and give them their payment account number over the phone.
“Online businesses should therefore enhance their ability to offer secure automated phone payments,” Ms. Litan said. “For example, businesses can use a transaction number generated during the online shopping season to tie a purchase to an automated phone-based payment. For this customer base, online merchants should also promote alternative payments, such as PayPal and Bill Me Later, where interest in using them increases as age decreases.”
Compilation Copyright © 2002 - 2007 Glenbrook Partners LLC. All Rights Reserved.
“Despite significant marketing campaigns by banks and card issuers to steer consumers towards using debit cards with a signature — ostensibly so that the banks can earn more interchange revenue — consumers prefer entering their personal identification number (PIN) to pay for groceries with their debit card over all types of signature-based card payments, whether credit or debit,” said Avivah Litan, vice president and distinguished analyst at Gartner.
“Banks promote signature-based debit payments because they earn more fee revenue from card-accepting merchants, on the premise that they are riskier and more prone to theft, so the banks need to earn higher fees to compensate,” Ms. Litan said. “Fraud rates on signature-based debit card payments are at least 10 times higher, and banks usually eat these costs if they are incurred in a card-present (or store) environment. Higher interchange fees paid by merchants to banks and card issuers for signature-based transactions must offset these costs or else banks wouldn’t promote the signature variety.”
When shopping at grocery stories, consumers prefer debit card payments that require entry of a PIN despite the fact that only debit and credit card payments with physically signed receipts typically earn them reward points. Consumers’ least-favorite payment type when shopping for groceries is contactless (wireless) payments, and there is similarly small interest in using mobile phones for making payments.
“Brick-and-mortar businesses who accept electronic consumer payments should promote use of PIN-based debit card payments by steering consumers to them through payment terminal programs and/or by offering store-based incentive programs,” Ms. Litan said. “Businesses pay less to banks for PIN-based payments and since consumers prefer them anyway, this is a win-win strategy for all parties except credit card issuers and banks.”
Consumers who have been affected by the data breaches publicized in recent years are more prone to change their online payment behavior than other online or offline activities, such as shopping and e-mail preferences. These consumers are more likely to call the online store and give them their payment account number over the phone.
“Online businesses should therefore enhance their ability to offer secure automated phone payments,” Ms. Litan said. “For example, businesses can use a transaction number generated during the online shopping season to tie a purchase to an automated phone-based payment. For this customer base, online merchants should also promote alternative payments, such as PayPal and Bill Me Later, where interest in using them increases as age decreases.”
Compilation Copyright © 2002 - 2007 Glenbrook Partners LLC. All Rights Reserved.
Thursday, February 7, 2008
Dave Holman Welcomed as the National Sales Manager / Director of Operations for Fast Transact, Inc.
OLYMPIA, WASH, JANUARY 2008 – Fast Transact, Inc. announced that Dave Holman has joined FAST TRANSACT as National Sales Director and Director of Operations. As an ISO and leading payment processor / merchant services provider, FAST TRANSACT is currently realigning its management structure to move to the next operation level. Holman’s employment is a vital part of that process.
In his new post, Holman will oversee all sales related activities from the company’s corporate headquarters in Olympia, Washington. He will also be responsible for the day-to-day operations with particular emphasis on the coordination of people and processes company-wide. Holman will report to David Solomon, founder and CEO of Fast Transact, Inc. and will work in partnership with all department heads to assure the smooth interaction and utilization of corporate resources.
Holman brings over 30 years of management and entrepreneurial knowledge to FAST TRANSACT, as well as Merchant Service Provider ownership experience. He is a graduate of University of Wisconsin and holds a BS and MBA. His retail sector expertise greatly compliments FAST TRANSACT’s already strong Internet capabilities. Holman’s plan for expansion includes agent offices throughout the United States and Canada, servicing accounts with the personal touch expected by the merchant.
In his new post, Holman will oversee all sales related activities from the company’s corporate headquarters in Olympia, Washington. He will also be responsible for the day-to-day operations with particular emphasis on the coordination of people and processes company-wide. Holman will report to David Solomon, founder and CEO of Fast Transact, Inc. and will work in partnership with all department heads to assure the smooth interaction and utilization of corporate resources.
Holman brings over 30 years of management and entrepreneurial knowledge to FAST TRANSACT, as well as Merchant Service Provider ownership experience. He is a graduate of University of Wisconsin and holds a BS and MBA. His retail sector expertise greatly compliments FAST TRANSACT’s already strong Internet capabilities. Holman’s plan for expansion includes agent offices throughout the United States and Canada, servicing accounts with the personal touch expected by the merchant.
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