Banks Say Debit Card and Check Fraud Attacks Are Gaining Momentum

PYMNTS Intelligence data has detailed the continuing appeal of debit cards as preference for everyday spending, prized for convenience and as a way to spend cash on hand, rather than tapping credit (and adding to monthly debt burdens).

The data show that individuals are  67% more likely to use debit cards than credit for groceries; 39% of consumers used debit to pay for their most recent retail purchases vs. 30% who used credit.

Just as debit is favored by individuals … it’s also a favorite of fraudsters. And as a result, banks are losing money to fraudsters, but they’re hardly standing still and are using advanced technologies to beef up their own defenses. The paper check? Well, those age-old conduits of bank account data and personal information are top choices for criminals too, but the continued shift toward money made mobile across digital channels holds promise in blunting fraud.

The Rise in Fraud Attempts and Losses

A new report from the Federal Reserve estimated that last year, debit cards were among the most targeted payment methods for fraud, as roughly three-quarters of financial institutions (FIs) said debit cards were tied to the most frequent fraud attempts and dollar losses, up 6% over the previous year. The Annual Federal Reserve Financial Services Financial Institution Risk Officer Survey also said that the number of FIs with monetary losses as a result of check fraud grew by 10% year over year. Overall, debit card fraud was responsible for 39% of fraud losses by payment type, followed by check fraud at 31%.

“In addition to challenges with scams and mule accounts, traditional legacy fraud approaches like forgery, counterfeits, stolen mail and impersonating authorized parties were noted as primary drivers” of fraud, the report disclosed.

Research done in collaboration between PYMNTS Intelligence and Hawk has indicated that 43% of the fraudulent transactions that financial institutions report are authorized fraud. Hawk, for its part, said just this week that it had raised $56 million in new funding to enhance its artificial intelligence (AI)-underpinned anti-fraud technologies to help banks counter financial crime. Elsewhere, PYMNTS Intelligence, in combination with Arculus, has discussed the rise and appeal of tap-to-authenticate metal cards that use embedded chips to authenticate users when those cards are tapped on a smartphone.

The data show that fraud based on stolen credentials accounts for 41% of all fraud cases, which in turn helps boost the waves of attacks — and the success of those attacks — detailed in the aforementioned Fed study. PYMNTS Intelligence and Arculus have found that nearly 90% of FIs have reported an increase in credential-based fraud over the past year, highlighting the weaknesses of current authentication methods. And 76% of FIs believe the tap-to-authenticate cards could increase profitability by reducing fraud and enhancing the user experience.

Checkmate for Check Fraud?

Check fraud is estimated to cost the economy at least $23 billion, and there are several initiatives in place to tamp down on their use. The Trump administration, as has been widely reported, has mandated that the Treasury Department stop sending payments out via check, or accepting check-based payments, within the next several months. B2B payments, especially, are still heavily steeped in checks, which facilitate 40% of commercial transactions. But Ingo Payments and PYMNTS Intelligence indicated in recent research that the shift to digital payments has helped stem the tide a bit (along with other benefits), as  digital treasury processes improved cash flow forecasting.

The adoption of instant payments, however, has seen a significant uptick among companies, with 77% of respondents utilizing this technology in 2024, up from 62% the previous year. The Fed study noted that instant/real-time payments fraud attempts and losses decreased 3% in 2024, and stated that “instant payments fraud attempts and monetary losses were reported as negligible.”