It seems like every week brings another headline about check fraud:
- “Connecticut man’s check fraud scheme brought in more than $350,000”
- “Metro Detroit USPS employees charged in $63 million Treasury check scheme”
- “Former Glastonbury postal carrier admits to stealing tax return check”
- “St. Louis man gets 7 years for fake check vehicle scam in Illinois”
For hospitality companies still using paper checks to pay suppliers, these cases aren’t just cautionary tales – they’re red flags. Paper checks continue to be one of the most vulnerable payment methods in business. Fraudsters know how to steal them, forge them, wash them, and reroute them. And because hospitality organizations often deal with a high volume of vendors across multiple properties, the exposure is even greater. Each additional check sent through the mail adds another opportunity for fraud to occur – creating both financial and reputational risk for an organization.
According to the 2024 AFP Payments Fraud and Control Survey, 63 percent of organizations reported experiencing check fraud in 2023 – more than any other payment method. Worse, 80 percent of organizations that use checks as a payment method experienced an attempted or actual check fraud attack. The numbers speak for themselves: checks remain the fraudster’s favorite target.
Hospitality companies need to stop gambling with their suppliers – and their bottom line. This article shows how to mitigate fraud risk.
Why Electronic Payments Are Safer for Hospitality Companies
Unlike paper checks, virtual card transactions and other electronic payment methods are protected by layers of digital and procedural security. The right electronic payments solution doesn’t just speed up a hotel’s payment cycle – it also builds in critical controls to mitigate fraud and reduce risk.
Here are just a few of the fraud-fighting features built into leading platforms:
- Multi-factor authentication (MFA). MFA ensures only authorized users can access payment workflows. Even if a user’s credentials are compromised, MFA adds a second layer of defense to block unauthorized access. This is especially critical for remote hospitality teams managing finance operations across properties.
- User access permissions. User permissions prevent unauthorized actions by restricting roles and privileges. Finance teams can assign granular permissions based on job responsibilities, helping eliminate risks tied to human error or insider fraud and tightening controls.
- Segregation of duties. Segregation of duties enforces separation between invoice approval, payment initiation, and reconciliation to prevent internal fraud. By requiring different individuals to perform each step, digital payment platforms prevent a single person from having end-to-end control. This reduces the risk of fraudulent behavior going undetected.
- Systematic workflows. Configurable workflows automate routing and approvals based on a hospitality company’s internal rules and thresholds – eliminating ad hoc decisions. This eliminates guesswork, enforces policies, and ensures consistency, even during peak seasons or staff transitions. It also makes it easier to demonstrate compliance during audits.
- Audit logging. Comprehensive audit logs capture who did what and when for every transaction – providing a defensible audit trail. Every action taken is recorded, time-stamped, and attributed to a specific user. That transparency helps identify red flags early and supports investigations if suspicious activity occurs.
- Data encryption. Encryption keeps sensitive payment data protected during transmission and at rest. Encryption scrambles data so that even if intercepted, it’s unreadable to bad actors. This protects both your organization and your suppliers from costly data breaches.
These are the kinds of protections paper checks simply can’t offer – and they’re especially important in a decentralized environment like hospitality, where finance teams often support multiple properties with different approvers, suppliers, and workflows.
Why Virtual Cards Are Even More Secure
While ACH payments offer strong protection, virtual cards go a step further – adding a host of features that are tailor-made for fraud prevention in supplier payments:
- Plastic-less by design. No physical card means nothing to intercept or duplicate. There’s no risk of stolen mail, lost cards, or skimming – because there’s no card to steal. That alone makes virtual cards far more secure than corporate purchasing cards or checks.
- One-time use credentials. Suppliers never receive the full 16-digit card number, making duplication or unauthorized use nearly impossible. Each transaction is tied to a unique set of credentials that expire after use. This greatly limits the usefulness of stolen information.
- Encrypted transactions. Card data is encrypted using sophisticated algorithms and tokenized for security. Even if a hacker intercepts data during transmission, they won’t be able to use it. This ensures supplier payments remain protected from start to finish.
- Built-in restrictions. Hotels can configure virtual card payments to work only with a specific supplier, for a specific amount (or amount range), and within a set timeframe. That means even if someone tries to divert the card credentials, the transaction will be automatically blocked. These restrictions make virtual cards nearly impossible to misuse.
- Integrated approval workflows. Unlike traditional procurement cards, virtual card payments flow through an accounts payable (AP) team’s standard approval process before any funds are released – ensuring oversight.This helps enforce accountability and supports compliance with an organization’s internal controls. It also ensures that virtual card payments follow the same risk-mitigation framework as traditional AP processes.
Virtual cards offer a level of control and visibility that’s purpose-built for hospitality finance.
How Embedded Payments Accelerate Reconciliation and Reduce Risk
One of the most overlooked ways to reduce fraud risk is by accelerating the reconciliation process – and that’s exactly what happens when payments are embedded directly within a hotel’s financial management system, like those offered by Data Plus. When payment initiation, approval, execution, and reconciliation all happen in one system, there’s less room for fraud to go unnoticed.
Reconciliation happens in near real time, with invoices matched to payments automatically and exceptions flagged immediately. That means no more chasing down approvals or reconciling days – or weeks – after a payment is sent. Embedded payment solutions eliminate the invoice-to-pay gaps that fraudsters often exploit and give hospitality finance teams full visibility into their cash position, payment status, and vendor relationships at any moment.Faster reconciliation is a critical safeguard that shortens the window of opportunity for fraudulent activity to occur. For hospitality finance leaders in a fast-paced, multi-property environment, that kind of control is essential.
Don’t Become the Next Headline
Check fraud isn’t slowing down – and neither are the criminals behind it. Every check a hospitality company sends puts it at risk of becoming the next headline.Electronic payments, especially when managed through an embedded payments platform with built-in controls, fast reconciliation, and virtual card capabilities, give hospitality companies the upper hand. They streamline operations, protect against fraud, and strengthen supplier relationships with faster, more secure payments. With check fraud hitting record highs, there’s never been a better time to make the switch.
