It’s undeniable: B2B payment fraud is everywhere and all US corporations are potential targets. AI-backed hackings, Chat-GPT generated phishing scams… Fraudsters use increasingly sophisticated tactics to infiltrate systems and divert funds. Baptiste Collot, Trustpair CEO, had the opportunity to discuss the why, the how, and the when of fraud at this year’s edition of the Windy City Summit. Get all the details in this article.
The Sobering Reality: Fraud Trends in 2024
The statistics are staggering: 96% of US companies have been targeted by fraud at least once in 2023, representing a 71% increase from the previous year (Get the full report here). Cyber fraud, in particular, has emerged as a dominant threat, with 83% of US companies targeted by advanced digital schemes. Fraudsters are no longer lone actors but organized groups employing advanced technologies like deepfakes, as evidenced by the $25 million fraud case in Hong Kong.
“The large majority of all of you have been faced with fraud last year, in your daily work. Fraud is here and you can’t escape it.” Baptiste Collot, Trustpair
The most common types of fraud include wire transfer fraud, vendor fraud, and CEO fraud, all sharing a common denominator – the exploitation of banking data to divert funds into fraudulent accounts. Beyond financial losses, successful fraud attempts can have cascading effects, eroding trust between partners, tarnishing reputations, and potentially leading to operational disruptions and long-term damage.
“ Another striking number: 66% of companies would stop doing business with an organization if it fell victim to payment fraud and lost its payment. That’s huge! And why? Because fraud has cascading effects: it impacts trust between partners, reputation with customers, investors, suppliers… It’s not only a financial risk but a huge operational risk that can lead to operational disruption and long-term damage.” Baptiste Collot, Trustpair
The Root Cause: The Data Dilemma
At the heart of the fraud explosion lies a fundamental issue: unreliable and unsecured data. Fraudsters capitalize on the abundance of available data, impersonating legitimate vendors or company executives and manipulating banking information to divert funds into their own accounts.
“What do the most common types of frauds have in common? It’s simple: at some point, the fraudster uses fake banking data to divert funds into his own account. This could be by impersonating a genuine vendor or the company CEO.” Baptiste Collot, Trustpair
The traditional methods of data control, such as manual callbacks and emails, are insufficient versus the volume of data and the sophistication of modern fraudsters. Finance teams are left grappling with inefficient processes that use valuable time and resources, while failing to provide effective fraud prevention.
“ Imagine having thousands of vendors and maybe hundreds of data change requests each month: do you really think you’ll be able to call or email each supplier and receive a genuine answer? The answer is no: manual data controls can’t work to block fraud. On top of that, these controls are very time-consuming and have low added value for teams that could use their talents elsewhere.” Baptiste Collot, Trustpair
The Solution: Vendor Data Management and Automated Account Validation
The key to combating fraud lies in mastering vendor data through automated account validation solutions. Fraud prevention software like Trustpair works with several banking data sources to continuously validate vendor data throughout the entire procure-to-pay process. This multi-layered approach involves verifying company information, banking details, and the correlation between the two, raising red flags for any anomalies or data changes.
“If your vendor is in the US but his bank account is localized in Hungary, there might be a problem and we’ll be able to raise the alarm before any payment is executed. Any data change or anomaly is a big red flag.“ Baptiste Collot, Trustpair
Contrary to the misconception that automation eliminates human involvement, these solutions empower finance teams by offloading manual, time-consuming tasks, allowing them to focus on high-risk cases and strategic decision-making. While only 28% of US companies currently leverage fraud prevention software, embracing such solutions is crucial to staying ahead of the fraud curve.
“Software is here to enhance and empower finance teams. It’s about having a tool doing the manual and time-consuming work so teams can have more time to focus on the most risky cases and situations.“ Baptiste Collot, Trustpair
Choosing the Right Solution: Key Criteria
When selecting a fraud prevention solution, finance professionals should evaluate the following factors:
1. Account Validation Reliability: Ensure the solution accurately evaluates vendors and delivers clear risk assessments, minimizing false positives and streamlining investigations.
2. Geographical Coverage: Consider the global footprint of your vendor network and choose a solution with appropriate geographical coverage.
3. Handling Special Cases: Look for platforms that offer additional human controls for cases where vendor risk assessments are unclear, providing a double layer of security.
4. Traceability and Collaboration: Prioritize solutions with robust dashboards, workflows, and communication features to enhance team collaboration and efficiency.
5. User Experience: Go for user-friendly interfaces to minimize the learning curve and ensure seamless adoption.
6. Deployment Support: Evaluate the level of professional support provided during implementation to ensure a smooth transition without straining internal resources.
7. IT Security Standards: Prioritize solutions that respect the highest IT security standards (SOC 2, ISO 27001), ensuring the protection of sensitive data.
8. Integration Capabilities: Consider solutions that can seamlessly integrate with existing systems ( ERPs, TMS, and procurement portals) for enhanced security and consistency across the procure-to-pay process.
Download our full Anti-Fraud project guidebook to get more tips!
To conclude
If you had to sum up the Fraud Story, here is what you should keep in mind :
- Fraud is everywhere. It’s a question of when, not if.
- Fraud happens because vendor data isn’t secure and reliable.
- Manual prevention isn’t enough: only automated account validation can secure our entire payment chain.
The question is: what will the end of your story be? Request a demo with Trustpair to make it a happy one.
