Why Business Check Payments are a growing fraud risk

The Vulnerability of Check Payments in Modern Finance

Paper checks occupy a strange position in corporate finance. Despite decades of digital transformation, they remain ubiquitous—used by over 90% of organizations for at least some payments. Yet this persistence comes at a cost: checks consistently rank as one of the most fraud-prone payment methods businesses use - not to mention expensive (see The Hidden Cost of Manual AP Payments).

The question isn't whether check fraud exists -it does, extensively- but why organizations continue accepting this risk, and what realistic alternatives might look like.

The Scope of Check-Related Fraud

Recent industry data paints a concerning picture. Finance professionals report that 63% of organizations experienced attempted or actual check fraud in 2024, making checks more vulnerable than ACH transfers, wire payments, or credit card transactions. This isn't a new phenomenon, but the combination of persistent usage and evolving criminal tactics keeps check fraud relevant even as other payment types become more secure.

The mechanics haven't changed much: stolen mail, forged signatures, altered payee names, modified amounts. What has changed is the sophistication of document forgery and the speed with which criminals can monetize stolen checks through multiple deposit channels.

Why Checks Remain Vulnerable

Three fundamental characteristics make checks susceptible to fraud:

Physical form factor. Unlike digital payments that exist only as encrypted data, checks are tangible objects that can be intercepted, photographed, altered, and reproduced. A check stolen from a mailbox can be ‘washed’ to change the payee name in minutes. Every checkpoint in the mailing and delivery process represents a potential vulnerability.

Settlement lag. The delay between when a check is issued and when it clears—sometimes several days—creates an exploitation window. By the time fraud is detected, the perpetrator may have already withdrawn funds or disappeared.

Manual processing dependencies. Check workflows rely heavily on human judgment at multiple stages: verifying signatures, matching invoice details, confirming payee information. Each manual touchpoint introduces both processing delays and opportunities for oversight.

The Cost-Benefit Calculation

Only 30% of organizations that experience payment fraud recover their losses, according to survey data. For every successful check fraud incident, companies face not just the immediate financial loss but also investigation costs, accounting reconciliation, potential auditor scrutiny, and sometimes damaged vendor relationships.

Yet checks persist because they solve real problems: they work with vendors who lack ACH infrastructure, they don't require upfront merchant fees, they provide physical proof of payment intent, and they're familiar to staff who've processed them for years.

The Case for Alternatives

Automated accounts payable systems, virtual cards, digital payment methods address check vulnerabilities through several mechanisms:

Workflow enforcement. Modern systems can mandate approval chains, require dual authorization for payments above certain thresholds, and prevent unauthorized users from initiating payments. These controls exist in policy for check payments but are harder to enforce consistently in manual processes.

Activity transparency. Every action in a modern payment system—who requested payment, who approved it, when it was sent, what supporting documentation was attached—creates an immutable audit trail. This visibility makes both fraud detection and investigation substantially easier.

Real-time anomaly detection. Automated systems can flag suspicious patterns that would be difficult to catch manually: duplicate invoices, payments to newly-added vendors, amounts that deviate from historical norms, or transactions that bypass normal approval workflows.

The Implementation Reality

Eliminating check payments entirely isn't realistic for most organizations. Vendor capabilities vary widely, and some payees simply cannot accept electronic payments. The transition also requires investment in software, process redesign, and staff training.

A more practical approach involves strategic reduction: identify which check payments carry the highest fraud risk or create the most operational friction, then systematically convert those payment streams to secure alternatives. Over time, checks can shift from the default payment method to the exception used only when necessary.

Organizations that have significantly reduced check usage report not just lower fraud risk but also faster payment cycles, better cash flow visibility, and reduced processing costs. The security benefits, while substantial, are only part of the business case.

Moving Forward

Check payments aren't going to disappear immediately, nor should they in some contexts. But their continued widespread use—despite clear vulnerabilities and mature alternatives—reflects inertia more than rational cost-benefit analysis.

Finance teams managing payment fraud risk should evaluate their check exposure honestly: Which vendors require checks versus which simply receive them by default? What would it cost to implement stronger controls around remaining check payments versus converting more payments to electronic channels? Where are the genuine obstacles to going digital, and where is it simply organizational habit?

The goal isn't to eliminate checks for ideological reasons, but to ensure they're used intentionally and protected appropriately—not simply because "that's how we've always done it."