Incoming Payments Fraud Costs Companies Millions Every Year

Fraud is both costly and common. In the last two years, 52% of companies with at least $10 billion in revenue experienced some sort of fraud, according to a 2022 survey. For 1 in 5 of these companies, the most expensive fraud attack costs more than $50 million. The problem appears to be worsening: A recent PYMNTS survey found 59% of financial institutions (FIs) experienced an increase in their overall fraud rate compared to the previous year.

Criminals are constantly probing for vulnerabilities, looking to exploit any weaknesses. While companies have mostly focused on securing outgoing payments and their accounts payable (AP) systems, many have neglected safeguarding their incoming payments and accounts receivable (AR) systems. These companies are thus at risk for incoming payment fraud — and the risks can be considerable. A survey found that the average loss associated with internal fraud — one of the most common types of AR fraud — was nearly $1.8 million per case. Because incoming payments fraud often stems from inadequate internal controls, companies must modernize the systems that govern incoming payments.

This edition of the “B2B Payments Fraud Tracker®” Series explores how companies can better secure their incoming payments systems with robust digital solutions and why doing so has benefits far beyond just fraud prevention.

Around the B2B Payments Fraud Space

Hybrid and remote work might be helping accelerate fraud trends. According to a survey from the Canadian cybersecurity firm CIRA, 55% of cybersecurity professionals view their organizations as more vulnerable to cyberattacks because some, if not all, of their employees work remotely. The heightened risk stems from remote workers often using personal devices, insecure Wi-Fi networks and file-sharing platforms that are less secure than their corporate counterparts.

In other news, new research reveals just how costly invoice fraud can be. Drawing from a survey of 2,750 businesses, it estimates that invoice fraud resulted in an average annual cost of $280,000 per middle-market business. During this time, the companies surveyed reported more than 34,000 cases of invoice fraud. The situation could even be worse than these numbers indicate, as the report noted that invoice fraud is likely underreported due to a lack of detection.

For more on these and other stories, visit the Tracker’s News and Trends section.

An Insider on Why Authentication Is Needed to Stop Invoice Fraud

Although fraudsters have more opportunities and tools to commit fraud in an increasingly online world, their general strategy is to exploit the vulnerabilities. Many companies do not have strong authentication procedures and are prime targets for invoice fraud — and criminals are looking to capitalize.

To get the Insider POV, we spoke with Candler Eve, vice president and director of enterprise fraud at MidFirst Bank, to learn more about a typical case of invoice fraud and why authentication is necessary to stop it.

Technology Is Needed to Tackle Fraud and Safeguard Incoming Revenue

At a time when the world is increasingly online, companies still using manual AP and AR processes are finding it challenging to keep up. Fraud, for example, limited international growth for 36% of companies using reactive, manual detection solutions, compared to just 5% of businesses using proactive, automated methods, according to PYMNTS research. Unsurprisingly, the same research found that just 17% of those using manual solutions for digital identity verification and fraud prevention were at least very satisfied with the solution; for organizations using automated solutions, the portion of those satisfied soared to nearly half.

The reason is clear: Companies can use digital solutions to improve their AR systems in myriad ways. One of the most important benefits pertains to better verification capabilities. According to a PYMNTS survey, identity verification is one of the top three challenges companies face, yet just 38% of businesses use document and identity authentication tools. Given the benefits of using digitally advanced AP and AR systems, companies are already adopting them in droves. A recent PYMNTS survey found that 64% of companies that had not invested in AR are currently investing or plan to invest.

To learn more about the benefits of using digital fraud detection and prevention solutions, read the Tracker’s PYMNTS Intelligence.

About the Tracker

The “B2B Payments Fraud Tracker®” Series, a collaboration with nsKnox, examines the overlooked risk of incoming payments fraud and what companies can do to protect themselves.