BOSTON-The smartphone boom is rapidly ramping up usage of mobile check deposit, which could open the door wider for crime if credit unions don't remain active in guarding against fraud through this emerging service, experts are cautioning.
Analysts believe most financial institutions are taking the proper steps to mitigate fraud from mobile deposits, but the concern is that as usage of the technology increases and CUs and other FIs become more comfortable with more and more consumers accessing the service they will relax limits on mobile deposits and the channel will no doubt become more attractive to fraudsters.
Research by Celent shows that roughly 1,000 financial institutions offer mobile check deposit today, but over the next year or two the technology will become commonplace. "Obviously there is a growing concern around fraudulent activity over mobile channels with RDC usage skyrocketing," said Bob Meara, senior analyst at Celent, a division of Oliver Wyman. "Fraudsters will try their methods out in new and different ways."
With organized crime paying more attention to higher-dollar opportunities, such as credit cards, experts say mobile check deposit losses today result more from individual consumers either scamming the system or making honest mistakes, such as a husband unknowingly depositing a check after his wife scanned in the same item earlier in the day.
Having the copy of the deposited check in hand is "creating a new degree of exposure for losses," reminds Randy Simoneaux, chief revenue officer at Ingo Money, Inc., Atlanta. "Obviously, before remote deposit, this fraud opportunity did not exist. You deposit the check at the teller station and away it goes."
Avenues for Criminals
Simoneaux pointed out that a criminal has several avenues to leverage, such as depositing the check at a bank or credit union and then taking that same item to a check casher and getting the money before anyone is wiser. While multiple deposits at the same institution are less common, sources explained, what fraudsters often do is download mobile apps from 10 different FIs and deposit the same check at all 10 institutions. Analysts told Credit Union Journal that most mobile applications detect and stop duplicate deposits only at the same institution.
Overall, experts feel that banks and credit unions are managing this growing threat due to multifactor authentication methods and risk mitigation software that is updated regularly. One source even sees the window of opportunity for RDC fraud closing (see related story).
Meara questions whether concerns about mobile check deposit fraud increasing are all warranted. Celent annually surveys banks and credit unions on the degree of losses they are taking across all RDC channels. "Consistently nine of 10 financial institutions say they have no RDC losses, and those who do have them say they are small."
FIs' success in stopping mobile RDC criminals is due not only to technology that catches duplicate deposits in time but also to mobile deposit thresholds-daily, monthly, and set according to the consumer's profile-and funds availability schedules. "More banks and credit unions are applying funds availability schedules," said John Leekley, founder and CEO of RemoteDepositCapture.com, Alpharetta, Ga. "Most holds are one to two days."
The holds on the money are not seen as bothersome to most depositors, added Leekley, as research shows consumers use mobile deposit more for convenience than to access funds quickly.
Financial institutions, as well, can cut off mobile depositors in the event they misuse the service, said Leekley. "Banks should not make the same mistake with the same customer. You see the customer use RDC and make more than one duplicate presentment and you shut them down."
Higher Limits Than Banks
Jim Ballagh, VP of business development/co-founder at Ensenta, Redwood Shores, Calif., has noticed that credit unions are setting higher mobile deposit limits than banks. Ballagh attributed that to credit unions knowing their members better than banks knowing their customers. Banks average about $3,000 daily limits per customer, according to Celent.
Much of the fraud prevention around mobile deposit is simply common sense solutions, sources indicated, such as knowing the depositor, educating members, and simple safeguards around check signing.
Financial institutions are doing well on the mobile deposit front now, reminded Gary Brand director of source capture optimization at Fiserv, Brookfield, Wis.
"But consumer usage of mobile deposit is increasing rapidly. I think this is a front on which we have to be ever vigilant. As long as we do that I think losses here will seem like simple rounding errors compared with other types of fraud."
