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E-check security raises some challenges that aren`t present with credit cards. For instance, merchants can`t get a positive authorization on an e-check the way they can with a credit card`s open-to-buy authorization. That`s the result of privacy requirements that prevent a bank from telling a merchant or its processor that a buyer has adequate funds in his checking account.
But merchants can overcome those obstacle by applying, in Kerlin`s words, "some basic common sense" to accepting e-check transactions. Among his recommendations: watch out for high-velocity new customers, verify the shipping address against valid-address databases and watch out for surges in small purchases of items that can be easily re-sold that can indicate an organized ring.
In spite of the differences between e-check and credit card processing, processors encourage retailers to consider the alternative. "We don`t see as much fraud with e-checks as we do with credit cards and it`s a lower-cost transaction," says Branaugh of Wells Fargo.
Wherever fraud occurs, the industry is also working on making itself smarter by cooperating across institutions, both individually and as an industry. "Financial institutions and merchants are working together in consortiums," Banaugh says. "We will share information about suspicious activities with our counterparts at other banks." Adds Ritchie of First National: "The more information you have from a variety of sources, the easier it is to stay even with the criminals. And we have found organizations and merchants very willing to work together."