In an effort to catch check fraud at the point of sale, K mart Corp. is installing electronic check readers to automate the item verification process.
The readers determine if a check is legitimate based on the strength of its magnetic ink line. If the ink is not resonant or not up to industry standard, checks are rejected as either counterfeit or altered.
With emergence of sophisticated desktop printing, counterfeiters have found new ways to forge checks, compounding an already serious fraud problem for retailers and financial institutions.
As such, Henry C. Farrar, senior vice president for administration at the New York Automated Clearing House, applauds new efforts to detect fraud.
"Although MICR line readers will not catch people who are using real checks that are bad, it will help to cut down on the number of counterfeit checks the stores take in," he said.
"There is definitely a trend in the industry to start using this type of technology to help stem losses from check fraud."
K mart, based in Troy, Mich., recently completed a 200-store pilot with a MICR indentification device from Checkmate Electronics Inc. The device, known as the CMR 400m, uses a patented technology to read magnetic ink characters on checks.
K mart plans to install the hardware in all its 2,400 stores by late spring. Upon completion of the rollout, K mart expects to have installed over 50,000 of the devices. Neither K mart nor Checkmate would comment on the cost of the reader, but industry sources placed the price at around $200.
"The use of magnetic ink character recognition readers will allow us to determine the strength of the MICR line to make sure the checks are legitimate and not forged documents," said James Osweiler, director of store systems implementation and support at K mart.
"Once the item is scanned and determined to be good, it is then approved through another on-line check approval system that is attached to our point of sale units."
K mart currently uses four different point of sale systems, but Checkmate's reader will act as an "universal" piece of technology for all of the retailer's platforms.
"Using this product allows us the ability to maintain a uniform inventory of product and will simplify our installation and training," said Mr. Osweiler.
