Payments fraud on the rise

What can you do to safeguard your business?

THE potential for payment fraud continues to be a major worry for businesses. That's according to a recent report by the AFP (Association for Financial Professionals), which found that 78% of US-based businesses experienced an attempt of payments fraud over the past year. This represents a significant increase from five years ago when 61% of participants had reported some instance of payments fraud.

In fact, the increase of these attempts has placed greater pressure on an organization's treasury department, which is often the one that spots these fraudulent transactions. The report states that 67% of payments fraud of survey participants was reported by treasury staff.

Majority of these security breaches tend to come from outside individuals via forged checks/stolen cards (65%) with electronic attempts coming in the form of business email compromise (BEC). BEC typically targets the individual that carries out wire transfer payments and sends the subject legitimately looking business emails in an effort to get the subject to reveal sensitive payment information of the company.

Electronic attempts of payment fraud are not only a risk to US-based companies but Asia-based companies that are still learning to grapple with recently implemented rapidly growing payment networks/systems. In India for example, the just over two-year old Unified Payments Interface (UPI) recorded the highest increase in transactions for the year helping compete close to 250 million electronic transactions in the Indian market. Back in July 2017, UPI had only completed 11.6 million transactions. Similarly across the region whether it be PayNow in Singapore or PromptPay in Thailand, relatively new payment infrastructure will have to address the threat of payments fraud in the future.

As companies in Asia slowly pivot towards accepting electronic payments, there should be a constant focus on upholding fraud prevention standards to ensure transactions go to the appropriate parties. One way could be though acquisition of new technology. PayPal last month bought Simility a company specialized in AI-based fraud and risk management for US$120 million. According to a statement from Bill Ready, chief operating officer at PayPal the transaction made sense for them because "digital commerce has exploded, and fraudsters have taken note, adapting and developing new methods to carry out their crimes."

Other ways to combat payments fraud could be as straightforward as better communication between a company's treasury department and information technology staff. The positive vision for better cooperation is there according to Dell EMC research citing that 96% of executives consider a close working relationship between CIOs (chief information officer) and CFO (chief financial officer) important to business success. However, only 51% of Asian-based participants of Dell EMC's survey felt that the collaboration of their respective CIO/CFO to be excellent.

Expect businesses to deploy additional fraud prevention methods, as payments become more sophisticated and faster with real-time processes increasing the risk of payment fraud.