Across the globe, financial institutions are rapidly modernizing to deliver secure, seamless payment experiences that meet the demands of digital-first consumers. Financial institutions face the challenge of enabling digital payments while simultaneously managing existing payment capabilities like checks. Although check usage is decreasing worldwide, in the US, checks remain the popular payment option for rent and larger transactions. In the EU, check volume is still deemed significant, with over 2.1 billion checks written in 2019, specifically in France, which was responsible for 1.6 billion checks processed that year.

Regulatory pressure on payments digitization

Many countries have embraced payments modernization and introduced initiatives to speed adoption and regulate the landscape. The Australian government is  officially phasing out checks by 2030 as part of a wider range of payment reforms for the digital era.

In circumstances like this, financial institutions still need to process checks quickly and securely during the transition period, as checks remain a legacy payment system for the time being. Because the majority of check processing exists on legacy infrastructure, new changes might create risks to the entire payments ecosystem. Financial institutions must also manage the impact on processing costs, as economies of scale reduce as check volume decreases.

The rise of check fraud

According to the Financial Crimes Enforcement Network (FinCEN), reports of check fraud have more than doubled over the last three years. FinCEN reported 680,000 cases of possible check fraud in 2022, up from 350,000 in 2021, indicating a 23% increase over 2020. Expert fraud strategists have predicted that total check fraud will hit USD 24 billion in losses this year, roughly twice what it was just five years ago.

Check fraud is a relatively low-tech and easy crime to commit, with a sizable pool of potential victims. As more individuals and scammers are jumping on check fraud opportunities, payments modernization can help address the gaps in check security.

The demand for broader payments modernization

As shown by the changing checks landscape, payments will continue to modernize quickly and evolve to meet changing customer demands. Financial institutions must prioritize payments solutions that can quickly adapt to changing customer needs and minimize disruption to business and existing IT infrastructure.

IBM® is working with financial institutions to harness the flexibility and security of the cloud to transform payments to meet customers’ needs today and in the future.

The IBM Payments Center™ (IPC) Check Services on IBM Cloud for Financial Services® provides a managed, secure platform built to scale up and down to accommodate changing check volumes. This solution enables banks to transact with an ecosystem of partners that have the security, resiliency and compliance capabilities in place to handle changing check processing needs. IBM Cloud for Financial Services is designed to help clients mitigate risk and accelerate cloud adoption for even their most sensitive workloads. 

The IBM Financial Transaction Manager (FTM) (which forms part of the backbone for the checks-as-a-service solution) integrates, orchestrates and monitors financial transactions, including checks. It delivers consistent processing across multiple payment types, enabling financial institutions to converge their payment operations onto a single platform. FTM includes prebuilt capabilities for immediate payments, SWIFT, ACH, SEPA, check processing, customer onboarding, transaction ingestion and more.

With the IBM Payments Center’s managed services, banks gain access to industry expertise in checks processing and business process outsourcing with our Payments-as-a-Service platform. The  uses the latest technologies to drive efficiency and value in payments services. Advisors in the IBM Cloud Expert Lab can also help banks adopt and leverage IBM Cloud® technologies to modernize check processing services, with an emphasis on achieving business outcomes.

As financial institutions modernize payments, they should minimize impact across their existing IT infrastructure. IBM Payments Center Check Services provides flexible, cloud-based components that can be integrated with the client’s existing operations and infrastructure. Our one-stop, managed solution is designed to provide cost-effective check processing capabilities and is optimized for enterprise core banking workloads with sensitive data.