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 forgers. Further, the industry's move to check imaging largely has 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 Lake Mary, Fla.-based Harland Financial Solutions (HFS).
Sensing a market opportunity, HFS has introduced a line of checks that can only be signed by the person (or persons) to whom it was issued. Using a technology dubbed "Validify," each check is pre-printed with a visible "signature code" generated using samples of the customer's signature. Then, a reader device can determine whether the signature on the check matches the one that generated the code.
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 to identify fraudulent checks, notes Hansen. Instead, antifraud measures in check processing now have to rely upon the information that can be gleaned from the face of the check. Thus, the HFS solution can survive being scanned, transmitted and reprinted as an image replacement document, not to mention being folded, mangled and mutilated.
Using technology from Mitek (San Diego), the signature codes are created 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.
Using 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 Atlanta-based John H. Harland Co., the parent company of HFS, which invested $100 million to upgrade its printing facilities in 2002.
With the signature codes in place, a signed check can be examined for validity at any point in the process, from initial presentment to back-office clearing. Since the means for validation is contained on the check itself, a branch teller or merchant does not have to send the check image to the back office of the issuing bank for verification. Instead, verification is obtained in real time.
Accordingly, HFS hopes to gain adherents to its technology not only in the back offices of banks that issue the encoded checks, but also at banks that do not issue checks using the technology to their own customers, according to Hansen. Another revenue stream, he adds, may come from major retailers, which can install Validify readers at the point of sale.
Raise the Flag
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 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 hopes the 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 an annual rate of 3.5 percent to 6 percent, Hansen adds. But for HFS, 2005 has been a "record year in growth of check volume," he says. "We're taking business away from our competitors." * --Ivan Schneider