Business-to-business (B2B) payments are transforming as companies of all sizes swap checks and traditional payment methods for real-time payments, embedded finance solutions and banking-as-a-service (BaaS) products. Adopting these quicker, more efficient methods has been swift — with 41% of U.S. businesses now using real-time payments in some capacity, according to a PYMNTS report — and will continue. By 2026, embedded B2B payments transaction volume is projected to hit $2.6 trillion, up from $0.7 in 2021.
Although companies benefit from switching to these quicker, more efficient payment capabilities, there is a potential downside: As payments become faster and easier to make, fraud can be harder to detect and prevent. A 2022 survey of business end users, financial institutions (FIs) and other relevant parties revealed that more than half had experienced fraud related to their faster payments offerings. Now that payments can be initiated and settled in seconds, businesses must adopt tools to verify invoices and authenticate payors’ and payees’ bank accounts and other important information.
The “B2B Payments Fraud Tracker®” explores the problems of invoice fraud in faster payments and how companies can adopt better fraud-fighting tools to reap the benefits of faster, easier payments while limiting the risk of fraud.
Around the B2B Payments Fraud Space
The problem of invoice fraud is so prevalent that the Better Business Bureau (BBB) issued a public warning over the practice, calling on companies to remain vigilant and take time to verify all incoming invoices. The BBB warned that fraudsters are targeting companies with scam invoices for office supplies, web services and other made-up goods and services.
Companies should take this warning seriously because the stakes are high. In a recent case, a man was charged with allegedly using fraudulent invoices to steal $5.8 million from an organic produce distributor over a decades-long scheme.
For more on these and other stories, visit the Tracker’s News and Trends section.
Technology Is Needed to Safeguard Faster Payments
Robust fraud prevention measures are now a must. When payments took hours or days to process, companies had more time to verify the authenticity of invoices and possibly claw back funds sent accidentally to fraudsters. Companies using faster payments, however, no longer have this leeway. Real-time payments are irrevocable once sent, making resolving fraud events more challenging — if not impossible. Businesses must have the right fraud detection solutions before processing a transaction.
Although fraud prevention has many components, invoice verification capabilities stand out as essential in the context of faster payments. Verification ensures businesses send payments and sensitive banking information to legitimate actors, not criminals. This is crucial because invoice fraud is common and costly: Between December 2021 and February 2022, this fraud type accounted for 55% of the money lost to scams by Barclays SMB clients, according to the bank. Companies should utilize technology that places verification and authentication front and center to protect themselves.
To learn more about how companies can protect themselves, read the Tracker’s PYMNTS Intelligence.
About the Tracker
The “B2B Payments Fraud Tracker®,” a collaboration with nsKnox, examines how faster and easier B2B payments elevate the risk of fraud and how businesses can respond by adopting better authentication and verification solutions.