Online check fraud schemes boom forces major US banks to introduce additional security measures such as drastically decreasing limits to mobile deposits as Fidelity recently did.
Fidelity Investments reduced its mobile deposit limit to $1,000 from $100,000 after numerous check scams, similar to those earlier faced by JPMorgan Chase, according to a Wall Street Journal report.
The new scheme works as follows: customers deposit fake or falsified checks into cash management or other types of accounts. Although it typically takes several days to verify checks before making funds available, some of the funds may be available immediately. This way, fraudsters quickly withdraw or invest them until their checks are identified as fraudulent.
Though checks aren’t often used in personal transactions these days, they are still common in business-to-business deals. Moreover, paper and digital checks belong to financial instruments most often involved in fraud. A recent industry report showed a 90% increase in suspicious activity with check transactions from 2021 to 2023.
To combat that issue, banks use different methods. They do not always disclose cybersecurity measures applied, though. Thus, Chase did not provide details about its dealings with the recent fraud-related issue. However, there were no reports about lower mobile deposit limits. Fidelity’s new lower mobile deposit limits tactic is currently applied only to its cash-management accounts, and not investment accounts like 401(k)s or Roth IRAs.
Customers appreciate the convenience of mobile check depositing. So do the banks, which require fewer physical branches and staff. However, the problem with digital check photos is that it’s harder to identify the fake copies. In this case, fraudulent paper checks are more obvious. “Banks face the challenge of balancing security with ease of use,” said David Donovan, head of financial services at Publicis Sapient, a global digital consultancy.
The issue of mobile check fraud and its prevention measures is part of a broader discussion on How to Find the Right Balance Between Protecting Consumers and Pushing Them Away With Over-Zealous Fraud Prevention.
