Avoiding the Network Effect of B2B Payments Fraud

B2B networks leveraging the latest technologies are only as strong as their weakest link.

As business-to-business (B2B) relationships evolve to become online-first and more companies digitize their operations, fraudsters will increasingly look to exploit any third-party or ecosystem vulnerabilities.

This, as Uber on Monday (Feb. 13) announced a 7-year deal to transition its information technology fully into the cloud from its own data centers using infrastructure platforms provided by both Google and Oracle, while a cyber breach last month at ION Trading Technologies shows the downward cascade a successful attack on underlying infrastructure can have on broader marketplace partners, participants, and vendors.

Nithai Barzam, chief operating officer of FintTech-security company nsKnox, told PYMNTS last month that fraud rings are investing heavily in technology and process and increasingly operating like businesses by prioritizing what makes sense.

“So many [businesses] talk about faster, real-time, immediate payments,” he said. “This is great to be able to pay and receive money quickly, but it also opens the door for what’s known as ‘faster fraud’ and closes the window of time to confirm compliance with anti-money laundering and anti-terror financing regulations.”

According to findings in “The State of Fraud and Financial Crime in the U.S.,” a PYMNTS and Featurespace collaboration, the frequency and intensity of targeted attacks on financial institutions (FIs) with over $5 billion in assets collectively caused nearly $120 million in average fraud costs for 2022.

Nearly two in three large banks (62%) report they are dealing with increases in financial crimes.

The implications of this recent surge in payment fraud attacks are billions of dollars lost, compounded by reputational damage that may take years to recover from — making it critical for organizations to protect every ingoing and outgoing payment they send or receive.

Making Things Safer Using Tech Is a Key Part of Making Them Better

While process efficiencies like back-office automation and payments digitization represent increasingly essential investments for organizations, they also create new opportunities for cybercriminals, many of whom are growing more sophisticated in their methods and techniques.

PYMNTS has previously reported on how, somewhat paradoxically, the complexity of next-generation digital scams and cyberattacks makes organizational leaders hesitant to adopt the appropriate modern tools to defend themselves due to concerns over possible technical difficulties in deploying and integrating them.

But as B2B payment volumes grow and more companies turn to digital solutions, embedded solutions must strike the proper balance between preventing fraud and generating revenue. Invoice fraud threatens cash flow, and in today’s macroeconomic climate, access to capital remains king.

By securing incoming and outgoing payments, companies can ensure their cash flow is not needlessly impeded.

With powerful technology that beats fraudsters at their own game, any organization can protect every payment.

Rather than seeing digital solutions as a tradeoff between multiple security steps and a frictionless experience, companies should embrace B2B solutions where those two features reinforce one another.

Leveraging transactional and other relevant, collected data to better identify and understand legitimate customers through know-your-customer (KYC) controls can also help enhance the personalization of the B2B experience. That’s according to Amit Agarwal and Debopama Sen, co-heads of Citi Treasury and Trade Solutions (TTS) Payments and Receivables, who told PYMNTS last month that breaking down departmental siloes and sharing relevant data between fraud and marketing and sales departments can help organizations avoid security pitfalls while supporting brand growth.

Leveraging Artificial Intelligence (AI) To Fight Fraud

Having the right technology can allow companies to attain security without sacrificing revenue. PYMNTS research finds that companies using automated solutions are more likely to be satisfied with their current fraud prevention systems.

In an increasingly online world, fraudsters have more opportunities to commit fraud and more tools to do so than ever before, making authentication controls critical and safeguarding sensitive information more important than ever.

During a recent conversation for the PYMNTS Executive Insight Series, Ingo Money CEO Drew Edwards told PYMNTS’ Karen Webster that he sees AI as having transformational potential around the payments processing experience.

For example, AI’s ability to sort through vast amounts of transactions and detect anomalies can modernize businesses’ KYC and identity verification (IDV) controls.

According to a PYMNTS survey, 85% of chief financial officers are currently investing or plan to invest in digital solutions for fraud prevention and risk management.

Despite the growing number of tools at their disposal, bad actors remain focused on one singular strategy — exploiting vulnerabilities.

Businesses focused on resolving technical debt and staying vigilant through a combination of accurate, timely data and tech-driven fraud prevention strategies may find they are able to protect both themselves and their business partners.

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