Soaring payments fraud is upping the ante for businesses to migrate to electronic payments.
A record 82 percent of organizations reported payment fraud incidents in 2018. That’s according to the 2019 Association of Financial Professionals (AFP) Payments Fraud & Control Survey.
Large enterprises are particularly vulnerable to payment fraud attempts. An eye-popping 87 percent of businesses with greater than $1 billion in revenue were the target of payment fraud in 2018, AFP finds. Sixty-nine percent of businesses with less than $1 billion experienced payment fraud attempts.
Business Email Compromise (BEC) – schemes use bogus e-mails to trick businesses into initiating payments, and account for many attempts at payment fraud. Eighty percent of companies reported BEC fraud attempts last year with 54 percent of businesses suffering financial losses as a result of the compromise.
While the percentage of businesses exposed to check fraud declined slightly last year (43 percent of businesses), AFP finds that checks continue to be the payment method most impacted by fraud.
From the moment they are issued, checks create lots of opportunities for payment fraud:
- Dishonest employees may issue checks without proper authorization
- Crooks can alter paper checks (“wash them”) or create counterfeit checks, along with using the bank routing and account numbers on paper checks for nefarious purposes
- Criminals can forge an endorsement or present a check more than once
- Resolving check fraud is a manual, time-consuming process that requires buyers to issue stop-payments, reissue payments, close/reopen accounts, pay fees, and order new checks.
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Payment fraud creates big financial risks, regulatory risks and reputational risks for businesses.
How electronic payments mitigate fraud
Electronic payment solutions help businesses mitigate against payments fraud. Here’s how:
- Access controls: Compared to paper checks, electronic payments make it easier to ensure chain of custody. But also look for an electronic payment solution with strong access controls across all payment methods. Best-in-class solutions will provide roles and permissions/privileges, configurable business rules, complete audit trails, hierarchical access, administrative controls for security settings, data encryption, system-level settings, and parameters (such as the amount, supplier, location, or date) for approved payments.
- PCI compliance: If cards are part of your payments mix, be sure your electronic payments solution complies with the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS outlines stringent requirements for safeguarding sensitive data, improving control over the posting process, and enabling detailed oversight and reporting of card transactions.
- Automated alerts: Unlike paper checks, electronic payments provide real-time visibility into the status of transactions as well as instant reporting on tasks performed by personnel and other key insights. Advanced electronic payments solutions also can automatically alert users of suspicious payments, based on pre-set thresholds and historical payment trends
Payments fraud is a big problem that is only getting worse. Accounts payable and finance professionals need to find ways to prevent them. And that’s where electronic payments come in.
Contact ACOM Solutions to learn how our solutions help mitigate the risks of payment fraud.