Necessity may be the mother of invention, but it can also solve banking problems in the midst of an emergency. Over the last four decades, overwhelming circumstances have accelerated financial technology evolution, and the COVID-19 crisis is no exception. In response to social distancing requirements, financial institutions have fast-tracked self-service banking such as interactive teller machines (ITMs), which are now increasingly a fraud target.
Before the 1970s, most banking took place during business hours with the aid of tellers and pens chained to desks. In 1977, Citibank invested some $100 million in introducing Citicard Banking Centers (featuring automated teller machines) throughout New York City. Nobody rushed to these 24/7 self-service banking units until 1978 when two massive snowstorms helped escalate ATM use by 20%. The positive response helped usher in a national ATM boom.
Solving Fraud With Interactive Teller Machines
Interactive teller machines (ITMs), the real-time video/audio version of an ATM, allow centrally based tellers to interact with customers through conveniently-located kiosks. ITMs are seen as a solution for financial institutions looking to expand banking hours and their geographical footprint pre-pandemic. They are critical with the arrival of COVID-19 and social distancing protocols.
ITMs offer a range of self-service options such as check depositing, cash withdrawals, account origination and payment of loans, along with the ability to communicate directly with tellers via video conference. Customer demand, combined with financial institutions’ need to deploy more machines, reconfigure and transform their physical space, and respond to the economic impact of the pandemic, ignited a growth spurt of self-service capabilities.
But are self-service banking kiosks secure enough? In addition to developing a complete operational strategy for rolling out ITMS, banks and credit unions should also consider likely fraud scenarios. As with any novel banking solution, fraudsters are quick to look for ways to take advantage of newly acquired technology.
An Advanced Fraud Solutions white paper, Guide to Securing ITMs from Fraudulent Deposits revealed fraudsters leverage potential ITM weaknesses. AFS suggested credit unions and banks consider how fraudsters might attack them.
High Losses From Fraudulent Checks
One area of particular vulnerability is fraudulent checks. The FBI reported check fraud in 2018 racked up more than $18 billion in losses in the U.S. It also hit about 70% of all organizations across the country. Other ITM/ATM crime includes skimming (a PIN pad overlay to capture consumer information), PIN compromise, deposit-related fraud, cash trapping, dispenser jackpotting (making the machines involuntarily spit out cash), transaction reversal fraud, card trapping, eavesdropping, card data malware, skimming chip card data (from devices inserted in readers), network packet sniffing, as well as other network compromise and remote network compromise for card data. AFS’ report, Beating BIN Attacks, detailing card-not-present fraud trends.
To mitigate potential ITM-initiated check fraud losses, there are steps financial institutions can take. Here are some places to start:
- Add real-time assessments. By evaluating check deposits made through self-service banking machines in real-time, credit unions and banks can quickly asses risk and stop potentially fraudulent items before a loss can occur.
- Access better data. By tapping into a nationwide fraud database with thousands of contributing members, financial institutions gain better insight into a check deposit’s funding account. This insight includes known counterfeits, insufficient funds alerts, closed accounts, duplicates, and other fraudulent items.
To download the Guide to Securing ITMs from Fraudulent Deposits report, click here.