Back to Blog
Published at | Updated:

ACH payment, wire transfer or check. Which is safest?

Gilad Idisis
Published at | Updated:

As a business owner, there’s a good chance you’re still using paper checks to pay your vendors or to get paid. Much like fanny packs and flannel shirts, checks are still around, though they have suffered a slow and steady decline in popularity since the 1990s.

Even though Electronic Fund Transfer methods (EFT, for short) like ACH and wire have been in use for years now, businesses are still relying heavily on paper checks to transfer money between them: In 2019, checks still accounted for 42% of all B2B transactions.

Why are paper checks still with us, even though there are faster and more convenient digital alternatives? One explanation is that paper checks are tangible, contrary to the digital ‘ones and zeros’ of online payment methods competing for businesses’ hearts and bank accounts. You can touch paper. You can crumple it. You can tear it to pieces and flush it down the toilet. And if you can feel it with your hands and see it with your own eyes, you can trust it.

Moreover, people are creatures of habit. They trust what they know and are apprehensive about change.

But are checks really more secure, or do they only offer a sense of security? And between paper check, online ACH payments, and wire, which payment method provides better protection for business-to-business (B2B) payments?

Most businesses experience payment fraud attempts

According to the Association for Financial Professionals, 74% of organizations experienced attempted or actual payment fraud in 2020. Moreover, the AFP stated that (spoiler alert), checks (66%) and wire transfers (39%) “...continued to be the payment methods most impacted by fraud activity in 2020.”

While check fraud has been in decline over the past years, the AFP report indicates that “Contributing to the decline in check fraud is the fact that organizations are using fewer checks in their B2B transactions as well as increasing the use of electronic payments…“.

Considering these numbers, business owners should take every precaution to protect their payment methods. This includes choosing the payment methods that offer the best security and failsafe mechanisms.

We should also stress that safety concerns are not limited to fraud cases but also to common instances of erroneous payments and being able to cancel them.

So, which payment method offers the best protection, and why?

Are checks safe?

Checks include protection measures that make it harder to tamper with them, like a security screen, warning box, padlock icon, chemical sensitive paper, fluorescent fibers, erasure protection, and a microprint signature line.

While the security features do make life much harder for fraudsters, checks are still exposed to several types of fraud activities and risks.

Check theft

Checks can be misplaced, lost, or stolen as they are physical pieces of paper. It can be a blank check, which is easy to misuse. But it can also be a check you already wrote to someone. The scammer can forge the indorsement on the check and then cash it.

Thieves don’t even have to challenge themselves by stealing directly from you. They can simply steal your mail at any point on its delivery route. The Postal Inspection Service data shows that USPS mail theft reports soared by 600% between 2017 and 2020, from about 25,000 in 2017 to roughly 177,000 through August 2020.

Add to that the findings of researchers at Georgia State University that mail-related check fraud is rising, with a 300% increase in the selling of stolen checks in darknet markets since August 2021.

Having your banking details exposed and used in scams

Your check has your banking details (like account and routing number) printed on them, which means that sensitive information is out there for whoever lays their eyes on it. A scammer can use your banking details in different ways. One example is when they use your bank details in a demand draft, which they can then use to withdraw money from your checking account without even needing your signature.

What protection do banks offer against check fraud?

Banks offer different services for business owners that can increase your check security.

The leading service is called Positive Pay. Positive Pay automates fraud detection by matching checks presented for payment with a list of checks your business issued before. The bank system matches the account number on the check, the dollar amount, and the check number, and if they do not match, it raises a red flag, and the bank contacts you to approve the payment. As with other services banks offer, most of them charge a fee to use Positive Pay.

Additionally, banks are required to reimburse you if they accept an altered or forged check with your name on it. However, the bank can refuse to compensate you by claiming that you contributed to the alteration or forgery because you didn’t exercise ordinary care.

You’re also exposed to fraud as the recipient of a stolen or forged check: the bank can take several actions in that case. They can refuse to honor the transaction, close your account or freeze your transactions and can even hold you accountable for any funds you withdrew with the check.

Opt for business checks, as they’re safer than personal checks

Business checks can provide an added layer to the standard protection that comes with personal checks, including security features like anti-copy technology, watermarks, holograms, and thermochromic ink. You can also invest in business checks with a higher level of security, like QuickBooks Checks or other providers.

However, business checks are still tangible pieces of paper like personal checks. So while they’re harder to forge, they can still be misplaced or stolen.

Are wire transfers safe?

Wire transfers are transactions initiated by authorized personnel between two banks or financial institutions. That’s why they’re considered very secure, especially when you compare them to sending a check in the mail.

Most wire scams involve the scammer baiting you into action. They’ll either try to get you to send them money of your own volition or give them access to your computer, so they can install malware and extract your online bank account details.

Can wire transfers be canceled?

The main security concern with wire transfers is that they are almost instantaneous, making them harder to stop.

In the case of a remittance transfer (a wire transfer to a recipient abroad), you will have up to 30 minutes to cancel the wire transfer and get your funds back, but only if the recipient still hasn’t picked up the funds or deposited them into their account. If they have, you can probably say “bon voyage” to your money.

No such protection exists in cases of domestic wire transfers, and banks usually state in their client agreements that you can’t change or cancel a wire transfer. Wells Fargo, for example, says that “Except for the 30 minute cancellation window for Outgoing Consumer International wires (…) an Order is final and cannot be canceled or changed by you. However, at your request, Wells Fargo can attempt to cancel or change an Order, but we will not be liable if we are unable to do so.”

Safety tips for wire transfers

There are some easy steps you can take to increase the safety of wire transfers and protect your business from frauds:

  • Educate yourself and your employees on common wire transfer scams and safety protocols. Most scams are infuriatingly simple and involve the scammer getting you to send them money under false pretense or a fabricated identity. Once you know how to spot the scams, you’ll be able to avoid them.
  • Be on the lookout for business email compromise scams and phishing attempts. It’s a common scam where you get an email from a scammer using a vendor address you know and trust, asking you to click a link attached to the email to transfer money. You unknowingly download malware on your computer by clicking it, giving the scammer access to your financial account data and passwords, which they then use to wire money out of your bank account.
  • If you receive any unusual emails from a vendor, contact them immediately before clicking any links.
  • Keep your antivirus and malware protection up-to-date. Your antivirus is a central part of your defense against cyber attacks. Check out this list of recommended antivirus software packages for businesses. Most importantly, be sure to keep your software up-to-date at all times.

Is ACH safe?

ACH is becoming more and more popular for money transfers between businesses and bill payments with every year that passes. Business-to-business (B2B) ACH transactions in 2021 are valued at $50 trillion, a 20.4% increase from 2020.

ACH payments are a secure way to transfer funds and can be considered safer than wire transfers for two main reasons: First, ACH is regulated by the federal government and managed by NACHA, which regulates and facilitates the ACH network. ACH fraud and error are very uncommon, thanks to NACHA’s strict oversight and security regulation.

Second, contrary to wire transfers that have only a brief 30-minute window to stop the transfer and are irreversible once the recipient collects the funds, NACHA provides a 60-day grace period to cancel unauthorized or erroneous payments, even if the funds have already been transferred.

Keep in mind that ACH, like wire transfer and any other electronic funds transfer method, is susceptible to the same phishing scams, and therefore you should still be careful with your information and be on the lookout for possible scam attempts.

Regardless of the payment method you choose, when it comes to the financial safety of your business, your first and best line of defense is knowledge and vigilance.

*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.