NationsBank Corp. has developed a service that uses imaging technology to help its corporate customers thwart check fraud.
The service, expected to be available early next year, is based on the Charlotte, N.C.-bank's positive pay service, which lets corporate customers track checks written against their accounts.
Positive pay flags suspect checks as "exception items." The on-line service would let bank treasurers inspect images of such checks, before issuing payment, for evidence of alteration or forgery.
The on-line service is a response to a strong corporate demand, said Ken Merrill, senior vice president at NationsBank.
"It does not take much in the way of check fraud to lose your shirt," he said.
Check fraud has mushroomed in recent years with the development of high- quality, low-cost printing technology that can be used to produce bogus checks.
Bankers said criminals also have taken advantage of regulatory changes to funds-availability schedules, which sometimes force so-called "banks of first deposit" to release funds before collecting them from paying institutions.
Combined bank and corporate losses from check fraud were around $10 billion in 1994, according to the American Bankers Association. Experts said the fraud numbers since then probably have grown.
In a recent Ernst & Young cash management survey, 84% of bankers found positive pay services to be "highly effective" in combating check fraud.
For this reason, they tend to be more popular than other modes of fraud prevention, such as individual inspection of checks and the use of nonreproducible check stock, which 25% and 16% of bankers, respectively, rated highly effective.
"Banks have given positive pay a ringing endorsement," said Lawrence Forman, cash management analyst at Ernst & Young. "Bank programs have been growing steadily" as corporate demand grows.
About 9% of the banking industry offers image-based positive pay services, according to a recent study by Payment Systems Inc., Tampa.
Officials there predicted about 31% of all banks will offer these services by 1998.