 |
|
| |
 |
|
|
|
|
|
| | Latest ABA Fraud Report Results Give High Marks for the Use of Shared Databases of Deposit Account and Item-level Information |
|
| |
Primary Payment press release 3/15/05
SCOTTSDALE, AZ - March 9, 2005 - Primary Payment Systems, Inc. (PPS), an affiliate of First Data Corp. (NYSE: FDC), would like to call attention to recent findings in the 2004 ABA Deposit Account Fraud Survey Report, which highly ranked the use of shared databases to fight fraud.
When rating the effectiveness of check fraud prevention procedures in the ABA Report, regional and superregional/money center banks (more than $5 billion in assets) ranked the use of both deposit account and item-level information from shared databases among the top external fraud filters.
Using Shared Databases to Mitigate Fraud Losses
PPS maintains and safeguards the National Shared Databases, which represent the largest cooperative effort of its kind to mitigate deposit, payment and identity losses. Updated on a daily basis, financial institutions and other financial service organizations contribute and share their most current account status, stop payment, return item, transit history and known fraud information.
"Since 1995, the nation's largest financial institutions have put aside their competitive differences and worked together with PPS to help create what has become the largest industry initiative of its kind - the National Shared Databases," said Shirley Inscoe, senior vice president of Wachovia Bank and chair of the BITS Fraud Reduction Steering Committee. "By delivering this information in a timely manner, we are able to play a critical role in mitigating deposit losses, while helping to accelerate funds availability."
"Banks are empowered by knowledge, especially when it comes to risk management. Fraud is rarely isolated to one bank, so it is important to know what is happening both inside and outside the institution," said Ariana-Michele Moore, an analyst with Celent Communications. "Shared databases that contain negative account information can equip financial institutions with the lessons already learned in the industry and the necessary tools to recognize a fraud or perpetrator before it enters the institution. On the flip side, shared databases with positive account information can increase the certainty (thereby effectively managing the risk) that the prospective customer will be a good customer."
Attempted Check Fraud is on the Rise
The ABA Report also revealed that while actual losses have remained relatively flat, attempted check fraud against commercial banks' deposits continued to rise - reaching $5.5 billion in 2003, up from $4.3 billion in 2001.
"As check fraud attempts continue to rise, our Early Warning services play an increasing role in helping to prevent industry losses. In 2004, we generated over 11 million account-level warnings (i.e. closed account, non-sufficient funds), and 4 million item-level warnings (i.e. stop payments, return items) for financial institutions," said Paul Finch, CEO of PPS.
Of note, survey respondents with less than $50 billion in assets ranked check fraud as the number one threat against their bank. Mid-sized banks ($500 million - 4.9 billion in assets) saw the largest increase in check-related losses, experiencing double-digit growth (more than 15 percent).
Sophie Louvel, an analyst with Financial Insights, said, "Given the results of the ABA study, smaller institutions, which have traditionally leveraged more process-based methods, may be inclined to review the check fraud loss prevention practices of larger institutions. In particular, they may consider evaluating technology-based tools that access the shared databases of account and item-level information managed by PPS."
"Today, fraud tools like those from PPS are more accessible to smaller institutions than was the case in the past. While the PPS databases have a very large national reach and are leveraged by approximately 90 percent of superregional/money center institutions, they only recently became available to all other institutions through cost effective, service-based means," added Louvel.
Identity Theft and New Relationship Screening
While check fraud was perceived as the greatest threat to banks in the ABA Report, identity theft ranked as the leading threat against the industry. Hence, tools that facilitated account reviews during new account opening - whether at branch locations or via the Internet or telephone - were generally recognized as the most effective fraud prevention measures.
The ABA Report also stated that new account fraud reemerged as a serious challenge for banks of all sizes. Accounting for a larger share of check fraud cases, 75 percent of new account fraud took place within 90 days of account opening. Community banks were hardest hit with 44 percent of their losses attributed to new account fraud.
"PPS has moved to real-time service based offerings for all of its Early Warning deposit, payment and identity services," Finch said. "Most recently, we have partnered with Deluxe Corporation as part of an overall strategy to help protect financial institutions and the customers they serve. By stopping fraud at the door, we can prevent much of the criminal element from compromising our financial systems."
The 2004 ABA Deposit Account Fraud Survey Report may be obtained through the American Bankers Association Web site at www.aba.com.
Early Warning Services will help financial institutions and other businesses assess risk when establishing and servicing their customers. Utilizing the collective knowledge and best practices in fraud management from leading financial services organizations, the company will integrate information and technology to fight identity and payment fraud. This intelligence is delivered through a suite of Early Warning fraud solutions, resulting in more than $1 billion in annual loss avoidance. Early Warning Services is expected to be a limited liability company owned by Bank of America, BB&T Corporation, JPMorgan Chase, Wachovia, Wells Fargo and First Data. For more information, please visit www.early-warning.com.
|
|
|
|
|
|
|
|
|
