ePayments Fall Short In B2B Payments Protection

Besides the efficiency and cash savings associated with automated processes, businesses that choose to stay connected to paper are missing out on another major benefit of going digital, argues AvidXchange.

The accounts payable automation solution firm published a whitepaper detailing what it considers to be a frightening reality about B2B payments: Fraud is prominent, and without automation, businesses put themselves at greater risk of this type of crime.

Paper documents with sensitive company data can be easily misplaced, destroyed or altered, AvidXchange noted. The data on this issue backs up these claims: According to the Association of Certified Fraud Examiners, paper checks are often at the heart of the issue, with nearly half of payment fraud cases linked back to this payment tool.

Recent reports by The Wall Street Journal, AvidXchange said, uncovered just how prominent the paper check remains in the U.S., citing Federal Reserve statistics that reveals businesses and consumers had written 21 billion paper checks in 2012 alone.

“That’s downright scary, considering it’s more than four times as many checks as were written that year in the European Union’s 28 member countries,” the AP automation firm said.

There is good news, however. Additional studies have found that not only is the instance of paper check usage on the decline, it is also decreasing in popularity for B2B transactions. As of 2013, found the Association for Financial Professionals Electronic Payments Survey, the use of checks in B2B payments had dropped to 50 percent, compared to 81 percent in 2004.

Electronic Payments Aren’t Enough

But even when businesses decide to go digital, they can still rely on automated processes.

The Business Email Compromise (BEC) is a good example of this. A firm using digital payments and recordkeeping practices may still be manually checking transactions for suspicious activity. In the BEC, a fraudster poses as a supplier or executive and requests an electronic funds transfer for a seemingly legitimate transaction.

In a blog post on the company’s website, AvidXchange pointed to one case in particular at its Revolution 2015 conference. One business professional spent $445,640 to ship a pipe that cost just $8.75, the post said.

In another case revealed at the event, an employee at a hospital used the tactic of generating fake invoices for printing services to scam his employer out of $10 million.

Other cases involved employees using check washing or fraudulent purchase approval for personal items, like designer shoes or living room sets.

In its whitepaper, AvidXchange cited recent statistics from the Federal Bureau of Investigation, which revealed a 270 percent increase in B2B payments fraud since Jan. 2015. Clearly, not all fraudulent payments in the enterprise stem from paper checks.

The firm suggests vendor verification, as well as vendor payment location checks, and other detection measures that could flag suspicious emails.

“You can accomplish these necessary security tasks by automating your accounts payable processes,” AvidXchange declared. “Automated fraud detection built into AP and payment automation tools is one of your company’s best lines of defense against fraudulent requests and duplicate requests for payment.”