Security and fraud prevention have consistently appeared in the Payments Barometer’s top 3 Drivers of Change since the start of the survey in 2016. And managing exposure to fraud remains a key priority for businesses. While this is good news, the need for better detection of fraudulent activity has never been more crucial, especially considering global economic instability and, more recently, as a result of COVID-19.
Businesses certainly take fraud seriously, but there are signs they feel powerless in the face of such challenges. A staggering 58% of decision-makers admitted to viewing financial loss due to payment fraud as ‘part and parcel of running their business’. This disclosure is a concerning assertion on the part of business decision-makers considering the financial losses they face.
Small businesses continue to lose money over time due to payment fraud. In this year’s survey, decision-makers in small businesses reported losing on average £99,830 to fraud over the last 12 months, and they are not alone. Decision-makers in medium and large corporates report losing between £45-66K more on average in 2020 than they did in 2019. And disturbingly, 47% of decision-makers feel there is little their business can do to recover the loss incurred due to fraud.
Unfortunately, as is so often the case, once the money is lost, it is lost. According to this year’s Payments Barometer, only 1 in 10 small business decision-makers report recovering more than 50% of their losses. Big businesses tend to gear themselves better against fraud, with 26% of decision-makers in enterprise organisations saying they successfully recovered more than 50% of their losses. Either way, the losses are substantial. This result paints a clear case for prevention, as recovering the money is likely to prove highly challenging.
How are big businesses successfully combating fraud?
Decision-makers in big businesses report they are more likely to use automated payment protection measures than their counterparts in smaller businesses. For example, 27% of decision-makers in enterprise organisations say they use automated employee behaviour monitoring. All companies, regardless of size, should be looking to invest in technological solutions that help detect fraudulent activity well before an outbound payment leaves the building.
Additionally, 57% of decision-makers in enterprise organisations report using bank account validation and verification measures, which are less likely to be adopted by small business and medium or large corporates. It is up to every business to take responsibility for implementing robust validation and verification measures or adopting new initiatives like ‘Know who you pay’ and ‘Confirmation of Payee’ if they want to stay ahead of the curve.
New payment initiatives come to market all the time, developed with the intention of building systems with greater assurance. The decision-makers we spoke to appear to have a relatively good awareness of these new payment initiatives. This year’s research indicates that 64% of decision-makers were aware of ‘Request to Pay’, and 48% and 34% were aware of ‘Confirmation of Payee’ and ‘Enhanced Data’ respectively.
However, all these new initiatives can inundate companies with jargon and buzz words, which seldom provide clarity on what these initiatives actually do, leaving companies to wade through the noise themselves. This lack of education offers an opportunity for banks, financial advisors and third-party partners to promote and support businesses as they get to grips with these new regulations and initiatives.
To read James’ full article on this year’s fraud and security findings, and hear from experts on additional topics, download the full “2020 Business Payments Barometer.“
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