Requiem for a Paper Check
By julia.baeva on Oct 09, 2007
The subject of check fraud in the corporate world never seems to leave the minds of the cash and treasury professionals in the U.S.
Recently, one particular check fraud scheme, discussed on one of the AFP's forums, caught my attention. It was simple and brilliant. The scheme relied on the loophole in the basic logic of paper check clearing. I will not go into the details here, lest some impressionable minds decide to replicate it. But what is worthwhile mentioning about this scheme is that you will find it pretty much impossible to implement it if the paper check did not exist.
So, why, in the age of smart phones, VoIP and GPS (or scramjet, nanotechnology and bioengineering), do the U.S. businesses still rely so heavily on what is believed to be the invention of the ancient Romans in the first century B.C. and what seems to carry infinite fraud potential?
Popular Opinion #1: Checks are a cheap payment option.
I personally think that anything that has to be printed on paper and chauffeured around by a uniformed guard in an armored truck is likely to cost you more.
Popular Opinion #2: Electronic payments equal electronic fraud.
The talent pool dries up pretty fast if the crooks have to use something more expensive and complicated than a color scanner/copier.
Popular Opinion #3: In the electronic world, once a malevolent person gets hold of your bank account information, you are toast.
I have to tell you that your paper check is doing an equally poor job of hiding your bank account information from the wrong eyes. Moreover, how do you explain that many European companies rouutinely post their IBAN and their bank's BIC code in the open on their web-sites?
Am I, perhaps, unjustly biased against the paper check because I work for an ERP vendor? Hardly. An ERP system can spit out a paper check or make an electronic payment equally efficiently. The choice is yours.