Since the establishment of the first ATM networks in the early 1970s, ATMs have become an essential component of consumer banking technology that continues to evolve. Customers have come to rely on them for convenience and ease in accessing their financial institution and making transactions without the need for a human interface or bank teller. This type of service answers the demands of our fast-paced society and may seem unconditionally attractive. However, security is a big concern for both banks and consumers and is one of the reasons limiting ATM usage.
Although ATMs create convenience for customers and generate income or cost savings for banks, they also allow access to criminals, who have multiple methods of fraud in their arsenal—from sophisticated gadgets that allow them to steal personal information from a card when swiped, to setting up and operating their own ATMs. Unfortunately crime is a concurrent element of modern society and it benefits from the same technological advances that are created to open new opportunities.
Even though the percentage of incidents of fraud relative to the total number of daily transactions at ATMs is less than one percent by some estimates, the menace of fraud should not be underestimated. It is necessary to be aware of existing threats, as well as the available technological innovations that safeguard against them.
For instance, withdrawals with cloned cards (or so called "white card" fraud, when stolen data is loaded onto the back of a blank plastic card that looks like a credit card) can be prevented by checking special security codes embedded in the magnetic stripes on the back of every ATM card. Similarly, shoulder surfing (looking over another person's shoulder in an attempt to obtain a password for an ATM or other data), and card skimming (using a hidden card-reading device and a camera to steal a customer's card information) can often be avoided by educating consumers and increasing their awareness and vigilance. Similarly, technology is available to provide powerful means of protection against other types of fraud. In particular, software can be used to combat empty-envelope fraud, which according to industry reports, is the number one type of fraud affecting ATMs.
Image-enabled ATMs using OCR technology can completely eliminate empty-envelope fraud, as well as help stop check kiting and closed-account fraud, as processing times become significantly shorter. Once checks are deposited, they are imaged and OCR technology automatically performs courtesy and legal amount recognition (CAR/LAR) on a deposited item, without having to rely solely on the input from the customer. Images and relative transaction data are sent to the central check processing site, where item processing and a complete audit are executed for clearing purposes. Thus, an image-enabled ATM becomes a remote deposit capture system, allowing for Day 0 or Day 1 processing as part of the financial institution's check processing workflow. As soon as the check is deposited, the image can be processed as a remote deposit item, resulting in faster processing and posting.
However, the idea of image-enabled ATMs is not enough to ensure the success of the project (enterprise). It is crucially important to choose a reliable software solution that can guarantee a read rate and accuracy acceptable for the application. Such products are available, and have been used (and proven in efficiency and reliability) by financial institutions in back office check processing for years. Nowadays, read rates and accuracy have achieved a level that is acceptable for applications that involve direct interface with customers, where a high false alarm rate could cause discontent and reduction in usage.
In addition to amount recognition, technology can execute CAR/LAR mismatch detection by verifying that the legal amount and courtesy amount are the same. This feature helps to detect check alterations and prevent fraud. Other fraud detection solutions are also available and, if integrated in ATMs, can help combat fraud. For example, signature verification can be performed at the time of deposit on "on-us checks," as well as be used to verify signatures on checks between members of an image exchange network if the images of signatures are shared.
These are just a few examples of software capabilities that can provide a reliable safeguard against crime. Better communication with vendors and collaboration in working out the requirements for emerging technologies or products will help to equip the industry with powerful, innovative, and secure solutions that will satisfy customers, generate revenue, minimize fraud and become a competitive differentiator for banks.
By Mike Fenton, Parascript, LLC
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