Check Fraud in 2025: How Real-Time Payments Are Changing the Game

Check fraud is on the rise, costing individuals and businesses billions of dollars each year. In fact, check fraud attempts increased by more than 60% in the past two years alone, making it one of the fastest-growing financial crimes in America.

While many view the traditional paper check as obsolete, especially as digital becomes the preferred payment method for most, fraudsters have adapted, making check-related scams more sophisticated than ever. In fact, traditional paper checks provide a perfect opportunity for fraudsters due to their slow processing times and limited security features. The good news? Faster payment systems offer promising solutions to these vulnerabilities.

The Check Fraud Problem

Check fraud schemes like "kiting" exploit the traditional three-day clearing window for checks. Fraudsters write bad checks and take advantage of processing delays—sometimes even leveraging time zone differences—to withdraw funds that don't actually exist.

Even in today's digital world:

• Check fraud continues to be widespread
• Social media has popularized check fraud "hacks"
• Many people unknowingly commit fraud by following these trends

A recent example illustrates this perfectly: a TikTok trend encouraged individuals to deposit checks without sufficient funds at ATMs, falsely claiming that major banks had loopholes allowing instant withdrawals before checks bounced. This misconception led many users to unknowingly commit fraud, highlighting the vulnerabilities inherent in our paper-based legacy systems.

Faster Payments: The Security Solution?

Contrary to initial concerns that faster payments might increase fraud, real-time payment systems actually offer enhanced security features:

1.  Rich Data Transmission
   Modern payment networks use ISO 20022 messaging standards that include:
   • Detailed sender and recipient information
   • Transaction purpose data
   • Invoice references
   • Real-time status updates
   
   This rich data environment makes it significantly harder for fraudsters to hide their activities or disguise their identities, unlike checks which carry minimal identifying information.
2. Real-Time Monitoring
   Unlike batch-processed legacy systems, instant payments feature:
   • Immediate transaction analysis
   • Real-time risk scoring
   • Automated authentication triggers for suspicious activity
   
   When suspicious activity is detected, financial institutions can intervene before funds are transferred – a stark contrast to check fraud, which often isn't discovered until days after the money has disappeared.
3. Built-In Protections
   Fast payment networks incorporate structural safeguards:
   • Network-wide transaction limits (until recently, capped at $500,000)
   • Participant-specific negative lists blocking known bad actors
   • Customizable validation rules for financial institutions
   
   These preventative measures represent a fundamental shift from the reactive approach required with paper checks.
4. Complete Traceability
   Every digital transaction creates a comprehensive audit trail showing:
   • Origin point
   • Recipient details
   • All intermediaries involved
   
   This digital footprint makes investigating fraud cases substantially more effective and increases the likelihood of recovering stolen funds.
   
   

Moving Forward Securely

The transition to faster payment systems represents a significant upgrade in our financial infrastructure's security capabilities. By embracing these modern tools, financial institutions can dramatically reduce fraud risks compared to traditional paper-based methods. Real-time systems combine speed with enhanced security—providing customers with both convenience and protection against increasingly sophisticated fraud attempts. As financial institutions continue modernizing their payment infrastructures, the marriage of speed and security will be essential for maintaining customer trust and operational efficiency.

Want to learn more about protecting your financial institution from payment fraud?

Contact our team today.

Written by: Dr. Angela Murphy, Vice President of Marketing and Solutions at Pidgin.