Trust has always been the foundation of financial services. For community banks, credit unions, and regional institutions, it is the reason members stay loyal across generations.
Today, trust is being tested in a new way. As financial institutions encourage members to move from paper checks to electronic payments (ePayments), many members hesitate. Not because they reject innovation, but because they fear risk. In a 2025 survey, we found that 22% of respondents view security, fraud, and phishing as their top business concern for 2026 and beyond.
The reality is this: payment modernization only succeeds when security is visible, proactive, and clearly communicated. Strong payment security does more than help prevent fraud. It builds the confidence members need to embrace digital payments.
Why Do Financial Institutions Still Rely on Checks?
Even as digital payment adoption grows, checks remain common—especially among smaller institutions and community banks. Understanding why is the first step to guiding change.
Familiarity feels safer
Checks are tangible and create a physical paper trail. For many institutions, that visibility creates a sense of control. Writing and mailing a check feels deliberate and secure, even if the actual risk is higher.
Misunderstood risk
There is a persistent misconception that ePayments are more vulnerable than paper checks. In reality:
- Mail theft and check washing are ongoing threats
- Counterfeit and altered checks are easier to execute than ever
- Fraud recovery from check-based transactions can be slow and operationally expensive
Institutions often underestimate these risks while overestimating cyber threats tied to ePayments. If they do not address both perceived and actual risks, the transition to digital payments stalls.
What Are the Risks of Staying with Checks?
Sticking with checks may feel like a safe option. It isn’t.
Rising check fraud
As mentioned earlier, check fraud is a real issue for businesses across the country. In 2023, it accounted for roughly $21 billion in losses—and that’s without factoring in the fact that 90% of mail theft goes unreported, according to Forbes.
Check fraud continues to grow due to:
- Mailbox theft and intercepted envelopes
- Check washing techniques that alter payee or amount
- Counterfeit check production using stolen account data
Unlike ePayments, checks move through multiple physical touchpoints before clearing, which increases exposure.
Operational risk for financial institutions
Manual, check-heavy processes can create internal vulnerabilities, including:
- Data entry errors
- Delayed reconciliation
- Higher exception handling volume
- Increased fraud investigation costs
These inefficiencies both impact institutional operations and affect member trust.
Reputational impact
When fraud occurs—regardless of payment method—members look to their financial institution for accountability. A single high-profile incident can damage long-standing trust.
The takeaway then becomes: maintaining check-heavy processes does not preserve safety, it preserves risk.
What Does Strong Payment Security Look Like?
To build confidence in ePayments, security must be layered, proactive, and demonstrable.
1. Built-in controls
Modern electronic payment systems include safeguards that checks simply cannot match:
- Multi-factor authentication (MFA)
- Role-based user permissions
- Encrypted data transmission
- Tokenization to protect account details
- Dual approval workflows for high-value transactions
These controls reduce both internal and external fraud exposure.
2. Real-time monitoring and fraud detection
Unlike checks, which are reviewed after processing, electronic payments can be monitored before funds move.
Effective systems include:
- Automated anomaly detection
- Transaction velocity monitoring
- Real-time alerts for unusual behavior
- Proactive fraud intervention
This ability to detect and stop suspicious activity in real time significantly reduces loss potential.
3. Compliance and audit readiness
Strong payment security aligns with regulatory expectations and audit requirements. Key components include:
- Comprehensive audit trails
- SOC 1 and SOC 2 controls
- Documented payment workflows
- Alignment with FFIEC guidance
Security must protect both the member and the institution.
How Strong Security Enables the Shift to ePayments
The transition from checks to ePayments is operational. Security builds the confidence institutions need to modernize their payment infrastructure, and that confidence is reflected in smoother, more reliable service delivery.
Reducing fear through transparency
Institutions are more willing to commit to ePayments when they have clear visibility into:
- How transactions are encrypted end to end
- How fraud monitoring detects and flags anomalies
- What protocols are in place when unauthorized activity occurs
Robust security turns abstract compliance requirements into a concrete foundation for digital operations.
Gradual adoption strategies
Institutions can guide members step by step:
- Encourage ACH for recurring bills
- Promote secure online bill pay for common vendors
- Introduce digital payment options alongside checks during a transition period
A phased approach reduces operational risk while allowing staff to build confidence with new systems at every stage.
Reinforcing control and visibility
One reason institutions have relied on checks is the clear paper trail they provide. Digital payment systems offer even greater oversight through:
- Real-time transaction tracking across payment types
- Instant alerts for exceptions or flagged activity
- Streamlined reconciliation and dispute resolution
- On-demand access to complete digital payment histories
When institutions have full visibility into their payment operations, they have the security to leave checks behind.
Best Practices for Financial Institutions Leading the Change
Financial institutions that successfully modernize payments typically follow a structured approach.
Lead with internal alignment, not mandates
Instead of forcing change top-down:
- Share data on rising check fraud exposure within your own operations
- Quantify how electronic payments reduce the institution’s financial and compliance risk
- Build internal consensus around protection, not just efficiency
Position ePayments as the smarter operational choice, not just the faster one.
Align processes across departments
Confidence in new systems grows through consistency. Reinforce ePayment workflows across:
- Back-office and payment operations teams
- IT and security departments
- Compliance and risk management functions
- Member-facing staff who handle payment inquiries
Every department should operate from the same playbook: digital payments are more secure, monitored, and institutionally supported.
Invest in secure payment infrastructure
Technology alone is not enough. Institutions should prioritize:
- Providers with strong security certifications
- Built-in fraud controls suited to the institution’s transaction volume
- Continuous monitoring capabilities
- Scalable systems that accommodate member growth
Operational expertise combined with automation helps ensure security remains consistent at scale.
How to Measure Trust During the Transition
Modernization efforts should track both security and relationship metrics. Key indicators include:
- Reduction in fraud incidents
- Increased electronic payment adoption rates
- Improved reconciliation timelines
- Fewer payment exceptions
- Higher digital engagement scores
- Member satisfaction improvements
If security investments are working, both risk and friction decrease.
Security Is the Bridge to Payment Modernization
Institutions do not resist digital payments because they dislike innovation; they resist uncertainty. Strong payment security can help remove that uncertainty.
Financial institutions can create the foundation for a successful ePayment transition by:
- Proactively securing payment infrastructure before migration begins
- Aligning internal teams around consistent operational standards
- Building real-time visibility into payment workflows from day one
- Ensuring systems and processes meet compliance requirements at every stage
Don’t let your business fall behind. In the same AvidXchange 2025 survey referenced earlier, 45% of respondents said that they are planning to increase their investment in data security. The shift from checks to ePayments is a strategic move toward stronger fraud prevention, better operational efficiency, and deeper member trust in your institution—not simply a cost-saving initiative.
Contact AvidXchange today and learn more about how ePayments can set your business up for success during these times of change.