Automation Strengthens Fraud Prevention at the Teller Window

Banking has shifted to a digital-first environment with consumer preferences moving toward digital self-service. As a result, financial institutions (FIs) are rethinking the role branches play in the current market.

Branches still hold immense strategic value for financial institutions despite waning activity in recent years. Several leading banks like Chase and Bank of America see branches as vehicles for economic growth and an essential component for customer engagement. Since launching its expansion initiative in 2018, Chase has constructed 1,000 branches. In addition, PNC recently announced plans to double its branch openings to over 200 across six states. As FIs reimagine their branch strategy, many are facing operational challenges and issues around fraud, forcing FIs to equip solutions to address problems at the teller window.

Fraudsters evolve alongside FIs and are constantly probing for any weaknesses or blind spots in their fraud mitigation processes. More than half of all fraud that financial institutions experience occurs during over-the-counter (OTC) transactions, which include cash withdrawals, money transfers and check deposits.

Automation strengthens fraud prevention

Fraud detection powered by machine learning analyzes transactions and images against historical data to flag suspicious activity at the teller window. This approach frees tellers from doubling as fraud analysts.

Many financial institutions are implementing automation solutions that check OTC transactions for signs of money laundering, fraud or unusual cash activity. When a transaction looks off, the ability to automatically alert a teller or even put a hold on a transaction can make a difference in stopping fraud within an institution.

Having solutions in place that automatically analyze transactions and offer appropriate next steps removes the need for tellers to interpret complex risk scores themselves. As a result, banks protect customer accounts and reduce losses. In some cases, certain solutions will use automation to route fraud alerts directly to an institution’s back office for adjudication by trained fraud analysts.

OTC fraud is persistent and growing

Although paper check usage in the U.S. has declined steadily with the popularity of digital alternatives, check fraud remains a persistent and growing threat. Check fraud is dynamic and comes in a variety of forms ranging from check alterations, counterfeits and forgeries.

Losses related to check fraud were estimated to reach nearly $24 billion in 2024. In addition, a survey conducted by the Association for Financial Professionals found that, compared to other payment methods, checks were most often subjected to fraud.

Checks are often used for larger transactions like rent or payroll and can be exploited easily, making them prime targets. Fraudsters further complicate matters by conducting repeated small-value transactions that are difficult for FIs to detect.

Coupled with check fraud, transaction fraud also accounts for a large portion of fraud perpetrated against banks and other financial institutions. Transaction fraud consists of deposits, return deposit items (RDIs), remote deposit capture (RDC) and duplicate deposits through ATMs against new, dormant and closed accounts.

Deploying countermeasures for OTC fraud

For FIs, addressing OTC fraud quickly and accurately can be a major challenge, especially if tellers are expected to double as fraud analysts. Forcing tellers to shoulder the burden of fraud mitigation only increases their workload and leads to more false positives.

Faster and more accurate fraud detection is achievable through real-time fraud mitigation solutions. Automated verification and fraud detection assist tellers starting at the point of disbursement and continuing through the clearing process.

With the right solution, checks are evaluated in real time, even for small dollar amounts that fraudsters often use to avoid suspicion. This includes performing deeper analysis on transactions, reviewing account history trend thresholds, prior deposited items, previous customer behavior and transaction location.

Depending on risk level, solution platforms can offer clear guidance to tellers indicating whether they should decline a transaction or take additional steps to verify the legitimacy of a transaction. Teller strategy benefits from integrated fraud solutions by balancing speed, accuracy and customer experience that protect both the institution and the client. FIs that can detect and respond to fraud in real time can reduce financial loss and the reputational costs of false positives that can offend legitimate customers.

By analyzing transactions as they happen, financial institutions detect OTC fraud instantly instead of relying on manual reviews. Automated check holds can be applied when required, helping to reduce financial losses.

Branches are not relics of the past and can coexist with their digital counterparts. Through automation, financial institutions can find success by reducing losses, protecting brand reputation and ensuring customers feel valued and secure.

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