AI Validates Trading Partners While Playing Role of B2B Fraud Fighter

The paper check endures, perhaps bafflingly so, in the digital age. There are easier ways to pay, of course, but for commercial transactions, the paper check remains entrenched as a key way to get funds from buyers to suppliers. In fact, as PYMNTS Intelligence has estimated, as many as 75% of firms still send checks despite their relatively high cost in terms of both time and money.

And fraudsters?  Well, they love checks — easy to steal, forge, or change details — so much so that check-related fraud has resulted in $24 billion in losses as recently as last year.

Ernest Rolfson, CEO of B2B payments platform Finexio, told Karen Webster as part of the “What’s Next in Payments” series on the payments circle of trust that filling the gap between analog and digital — with a platform approach and a bid to raise awareness of the vulnerabilities of paper checks — can create a safer B2B ecosystem with less fraud.

Trust in that system hinges on getting the information that’s needed to validate businesses, check them thoroughly, and make sure, consistently, that bank accounts are valid and linked to the right company.

Lack of Knowledge

As for the educational aspect of Finexio’s mission, said Rolfson, “There’s a lack of knowledge around the electronic payment methods are out there — and just how easy it can be to adopt them.” Many of Finexio’s enterprise clients, he said, came to the FinTech having never even heard of a virtual card. The banks that have traditionally served those firms with a diverse set of commercial treasury products have come up a bit short in delivering the products and services that will move commercial payments toward a “zero check” environment.

In the meantime, he said, “there’s been an evolution, and increased sophistication, on the part of the fraud tactics as they relate to paper checks. So many companies have been burned by that. And with the sheer amount of paper checks that are out there, this is the highest risk vector.”

None of this is to say that companies rely entirely on the checks. Rolfson noted that 70% of clients had embraced some form of electronic payments, largely through ACH, though that payment modality has its own risks of fraud tied to bank account information, identity verification and AML. ACH vulnerabilities are especially apparent in an environment where fraudsters will try to change account details to get funds sent into their own coffers.

For the companies targeted by the criminals, said Rolfson, “they don’t know who’s on the other end of the phone — or how to match the information,” and creating an automated audit trail is onerous.

“There’s an opportunity to change the ‘trust landscape,’” surrounding B2B payments “by providing improved accessibility and efficiency through software workflows around managing the fraud and managing changes — which gives high confidence to buyers and suppliers.”

Finexio bolsters that trust landscape by verifying details of the companies on its platform, including billing details and banking information, using AI to monitor transactions in real time. Banking partners, he added, including J.P. Morgan, have embedded their own check security technologies into the platform, including offerings such as Positive Pay, which facilitates secure (digital) transmission of check details.

“There are many software tools out there,” he told Webster, “and point solutions for fraud and safety. What we’ve done is to bundle many of them into one package … so [companies] don’t need to know or care what all of these different apps and services are.”

“We’ve also built our own algorithms and our automation” to match and track check and remittance data to addresses,” said Rolfson, to flag discrepancies for further review and to see if stopping payment is warranted.

“It’s a multi-layered approach” to fighting check fraud that helps money move faster, and suppliers are paid more efficiently, Rolfson said, adding that “there’s no magic bullet because you need to have a few shots on target at all times.”

Taking on the Risk

The data-driven, platformed “payments-a-service” approach, he said, also allows Finexio to offer clients its Finexio Shield, which provides coverage against losses (for a fee) from fraud discovered and reported during the service period, up to $1 million. The service, which he said is an amalgamation of all of Finexio’s tools, also assigns AI-powered payment risk scores to help clients gain insight into their own vulnerabilities on a per-transaction basis.

“This just speaks to the level of trust that we have — and we have the data in place to know what’s going on.”

Looking into 2025, said Rolfson, 60% of companies on Finexio’s platform have embraced virtual cards, with the benefits of earning cash back as they pay suppliers, and the firm will look to move the needle even higher on that use.

“We’ve built out this solution,” he noted to Webster, “and though we’re a payments company and not a security company, trust and safety are core to what we deliver.”