Virtual Banks Not a Threat Yet, But Present Competition to Established FIs

An article in USA Today describes how thieves use electronic payments to steal social security benefits, but waits until the end to reveal the most crucial fact:

Even given the thousands of checks stolen electronically, the number pales in comparison to losses when checks were mailed the old fashioned way. According to O’Carroll, the inspector general, in the 2012 fiscal year more than 521,000 Social Security checks were reported lost or stolen.

The problem was summed up by John Dillinger who, when asked why he robbed banks, responded “because that’s where the money is.” As long as money is moving through the system, there will be thieves who try to find ways to get it.

Ending the theft of checks from mailboxes is one of the reasons the U.S. Treasury has been working to move from paper to electronic payments since 1996. The article mentions how many electronic scams have been reported:

Already there are nearly 40,000 reports of this type of scam. In Florida, 7,721 people have been victims of direct deposit fraud.

Note, though, that the headline does not say that electronic payments reduces theft by over 90 percent. While every new technology brings new risks, these need to be evaluated in context of the big picture, not simply by anecdotes of people who have been taken advantage of by clever fraudsters.

Click here to read more from USA Today.