Image Systems Mobilized In War on Check Fraud
With losses from fraudulent checks rising steadily, more banks are fighting back with workstation displays of authorized signatures.
Those using such systems range in size from $80 million-asset First National Bank of Naples in Florida to the $5 billion-asset European American Bank in New York.
Check fraud is estimated to cost financial institutions $4.5 billion a year. It is not known how much of that goes to people who fake signatures on checks, but the Federal Bureau of Investigation has said as many as 2,000 forged checks a day may be passed at banks across the country.
Rising Trend Foreseen
As printing and other technologies advance, the number of forgeries is likely to keep rising, American Bankers Association officials said.
Many bankers feel an electronic system for verifying the authenticity of a signatures will take a bite out of those numbers.
"Signature verification is now not thought of as simply an isolated, back-office facility," said Bill Flynn, assistant vice president and unit manager of the automation group of European American Bank in New York. "It's a bankwide policy for holding down operations costs, minimizing risks, and improving the quality of the product we deliver."
"I can point to several instances in the last few months alone where [using the system] we have refused to cash a check because the signature was not right," said Garrett S. Richter, executive vice president of First National Bank of Naples.
Signature display systems for microcomputers, midranges, and mainframes are available from a number of vendors.
First National of Naples uses a system from Lundy Financial Systems, Charlotte, N.C., for a midrange host computer. European American runs mainframe software from Sterling Software Inc., Dallas.
Both systems both rely on an elementary form of image processing technology.
How It Works
In converting from manual check authorization to an automated system, the signature cards that most financial institutions use to verify checks are scanned and turned into digitized images that can be stored on the host computer.
When a check is submitted for cashing or deposit, an image displayed at the a teller's or platform official's workstation is used to match the signature against the authorized electronic version. The employee can keep the customer in sight.
Though automated signature verification has become more popular in recent months, experts said relatively few institutions have installed the technology. The return on investment is often hard to quantify.