Many security features meant to ensure that paper checks are valid will not work when they have been turned into digital images, as banks are preparing to do.
Obviously, watermarks and background ink will not do the job. But bar codes and some other graphical elements can survive imaging and provide a measure of security, according to a recent study.
The check printer John H. Harland Co. is working on one such solution. It is about to begin piloting a bar-code feature that it says can identify forged signatures, in effect enabling checks to authenticate themselves.
It can verify check images as well as original checks, said Scott A. Hansen, the vice president of business development and strategic marketing at the Atlanta company's technology subsidiary, Harland Financial Solutions Inc.
"The bank knows what the signature should look like," he said. The system can spot when the "signature does not match what it is supposed to look like."
The company has completed proof-of-concept testing and plans to kick off a pilot project with several banks shortly, Mr. Hansen said. He would not name them but said one is in the top 10.
An announcement is to be made today. If the test goes as planned, the company could make the new feature generally available in the second half of 2005, he said.
"Maker fraud," an unauthorized person's signing an otherwise valid check, is the most common type of check fraud, Mr. Hansen said. It is hard to prevent, he said, because "nobody verifies signatures - it's very, very rare."
The Harland system puts "a digital emblem" on the face of the check, Mr. Hansen said. The emblem, which uses a mathematical algorithm to describe the account holder's signature, would be printed on new checks when an account is opened or a customer reordered checks.
Once a customer writes a check and signs it, the system can verify the signature against the data stored in the bar code, Mr. Hansen said.
The bar code can hold data on multiple signatures - for example, those of a husband and wife with a joint account who are both authorized to sign checks.
"We envision it being used and deployed at all different points of the payment chain," Mr. Hansen said.
The ultimate goal would be to install the software at a bank teller window or a merchant's checkout counter, where a digital check scanner could read the bar code and perform the analysis on the spot "so the fraud is headed off before the merchandise is even handed over," Mr. Hansen said.
Harland developed the software used to compare the signature image with the emblem with Mitek Systems of Poway, Calif.
The feature could help Harland enlarge its share of the U.S. market for printed checks, Mr. Hansen said. Deluxe Corp. is the largest check printer; Mr. Hansen said Harland has 25% to 30% of the market.
Nearly 40 billion checks a year are still written in this country, but the number is slowly falling as consumers turn to online banking and debit and credit cards.
Avivah Litan, a vice president at the research and consulting firm Gartner Inc., said banks will need to employ innovative approaches to address check fraud in a world of digital images.
Harland's technology, with which she was unfamiliar, sounds "more robust than what you get in the physical world," Ms. Litan said. "It follows the image through the presentment and exchange, and it's always on the record.
"You don't have anybody at the bank checking signature cards today," Ms. Litan remarked.
In September the Financial Services Technology Consortium, an industry-backed research organization, reported that it had identified several security features that could remain viable after imaging.
Frank Jaffe, the president of MorSecure, a technology security management firm in Falmouth, Maine, led the study. In an interview Thursday he endorsed the "general concept of using bar codes or other symbols to put information securely on the check that can be verified," though he added that the role of the consortium is not to endorse particular products.
