The usual method of authenticating the signature on a check, if done at all, involves a cursory comparison of the signature with a signature card at the branch. This poses little or no threat to the casual forger, who may have stolen a blank check from an unsuspecting family member or from a neighbor's mailbox.
Sensing a market opportunity, Harland Financial Solutions (Lake Mary, Fla.) has introduced a line of checks that can only be signed by the person to whom it was issued. Using technology from Mitek Systems (San Diego) dubbed "Validify," each check is pre-printed with a visible "signature code," which is a rectangular area containing the encrypted digital encoding of a signature.
The industry's move to check imaging has largely neutered many of the security features that have been added to checks over the past decades, observes Scott Hansen, vice president of business development and strategic marketing at Harland Financial Solutions. When it's increasingly likely that a check will be presented as a digital image, it's hardly practical to rely upon temperature-sensitive ink, micro-printed signature lines, ultraviolet features, multistain security paper and the like. Instead, antifraud measures in check processing now have to rely upon the information that can be gleaned from the face of the check. That's why Harland wanted to develop a solution that could survive being imaged, transmitted and reprinted as an image replacement document, not to mention being folded, mangled and mutilated.
The signature codes are encoded using several samples of the customer's handwritten signature. These signatures can be obtained at the time of account opening (in which case six samples are required), or by combing the bank's existing image archives for signature specimens as they appeared in past transactions. With the samples, a one-way, secure encoding process generates the signature code, which can be printed on each and every check issued to the customer. The checks are printed using the digital check-printing capability of John H. Harland Co. (Atlanta), the parent company of HFS, which in 2002 invested $100 million to upgrade its printing facilities.
With the signature codes in place, a signed check can be checked for validity at any point, from initial presentment to back-office clearing. Since the means for validation are contained on the check itself, a branch teller or merchant does not have to send the check image in real time to the back office of the issuing bank for verification. Accordingly, HFS hopes to gain adherents to its technology not only at banks' back offices, but also at banks that do not issue checks using this technology for their own customers. Another revenue stream may come from major retailers, which can install Validify readers at the point of sale.
The company's ID validation system will process the signature and other characteristics of the check to determine what the encoding should look like and then compare that to the pre-printed encoding on the check. If the two encodings match, the check is accepted. Otherwise, the system will flag an exception that should prompt further action. Although it could be as innocent as a dog bite or a sore hand causing a significant variation from one's original signature, the expected result will be an enhanced ability to catch and deter check fraud.
Harland also hopes that this technology will catch on as did the MICR line, thus justifying its capital investment in digital printing. In the commodity market of check printing, "a little differentiation goes a long way," says Hansen.
The $500 million-per-year business of check printing has been declining at the annual rate of 3.5 to 6 percent, Hansen adds. But for Harland, 2005 has been a "record year in growth of check volume," he says. "We're taking business away from our competitors."