B2B Payment Ecosystems Tackle Business Email Compromise

When the likes of Google and Facebook can fall victim to B2B payments fraud, it’s time for companies of all sizes and industries to pay close attention to the security of their accounts payable (AP) and accounts receivable (AR) operations.

Scams like business email compromise (BEC) continue to run rampant throughout the globe, with cyberattackers using a variety of methods to infiltrate company email accounts, pose as legitimate suppliers, and redirect B2B payments to a fraudster’s account. The result? More than $1.8 billion in financial losses suffered in 2020, according to the FBI, and that’s just in the U.S.

Across the pond, BEC scams are similarly pervasive and damaging, as Nook Co-Founder Henry Arnold experienced firsthand. As his fellow co-founder and Nook CEO, Joseph Lines, told PYMNTS, Arnold had previously worked at a business that fell victim to a relatively simple BEC scam, resulting in a $3 million payment on a fraudulent invoice.

“When this came up, we said, ‘How can such a sophisticated, technically-savvy organization fall victim to an obvious scam?’” said Lines. “We did a bit of Googling, and you look around and see Facebook, Google, the large enterprises, they all fall victim to this. If you look in the U.K. alone, it’s about a $10 billion problem.”

Safeguarding B2B payments became the crux of the creation of Nook. Yet as Lines explained, addressing some of the biggest points of friction that expose businesses to fraud risks can also have more broad-reaching impacts that strengthen the buyer-supplier relationship.

An Ecosystem Approach

What Lines and Arnold concluded is at the heart of the B2B payments fraud problem is often the PDF.

“All invoicing today is basically predicated on having to send this trade document around as a PDF,” said Lines. “It’s really hard to verify. Is it legitimate? What are the bank details I need to wire these funds to? And that’s what leads to this high prevalence of fraud.”

By creating an ecosystem of B2B buyers and suppliers, a digital platform can nix the need for vendors to send PDFs and instead rely upon a secure, closed-loop environment that can facilitate invoicing, payments and reconciliation.

Doing so, Lines explained, means closing the gap between AP and AR. Supporting both ends of a B2B transaction within a single network can create a B2B community of trust, much the way Twitter can assure followers that an account is actually owned by the person it claims to represent.

While there is no blue checkmark for PDF invoices, enabling B2B invoicing and payments within a unified ecosystem can reassure buyers that the invoices they pay are from legitimate vendors. Additional measures like integrated know your business (KYB) checks enhance security and preserve the integrity of B2B payments — and B2B relationships.

Fostering Stronger B2B Ties

This week, Nook announced a partnership with Yapily to further strengthen the security of B2B payments within its network (which is currently operating in beta mode as Nook plans for a full launch in the coming weeks). Yapily will provide its open banking infrastructure, which will enable businesses to verify their suppliers and authenticate those vendors’ bank accounts.

With real-time payments widespread in the U.K., and on their way to future ubiquity in the U.S. and elsewhere, the need for organizations to mitigate B2B payments fraud risk before it occurs will grow only more critical. After all, it’s far easier to remedy any B2B payment issues at the time of invoice processing and payment approval than it is to attempt to claw back funds that are settled instantly.

While Nook was bred from the issue of B2B payments fraud, Lines noted that many of the strategies to mitigate risks are the same tactics that can bring about a more optimized B2B payments flow overall.

Streamlining KYB checks and bank account authentications can accelerate supplier payment times, for example.

“If you’re in a world where you’ve got verified details for your buyers and suppliers, then you’re going to be able to pay people on time,” Lines said, adding that the issue of late payments can be “detrimental” to the buyer-supplier relationship, and indeed remains a widespread problem in the U.K., U.S. and around the world.

Mitigating risk isn’t merely about protecting one’s own company. It’s also about ensuring relationships with business partners can thrive, empowering firms to trade, transact and keep the economy rolling.

An ecosystem approach to combatting BEC scams and other B2B payments-related frauds also has the potential to foster that relationship if enough buyers and suppliers are willing to participate. As awareness grows as to the importance of business data verification, fraud risk mitigation and strengthening B2B ties, the opportunity for networks to multitask and combat a range of pain points in a single platform can help drive adoption.

“Business is about collaborating,” said Lines. “The health of the small business is hugely linked to the strength of its relationship between buyers and suppliers.”