Is Your B2B Payment Method Safe or Putting You at Risk?
Accounts payable is the area of business most often hit with fraudulent activity and loss, according to the 2020 Global B2B Payments Survey, with 52% of respondents reporting a higher risk of fraud over the previous year. The survey reveals that overall, payments security concerns are increasing, which poses the question to CFO’s and other business leaders: Which payment method is the most secure?
Let’s take a look at the most common types of B2B payment and assess their risk.
Data from a March 2020 PYMNTS article found that 81% of businesses still process payments using paper checks. Never mind that the average cost to process a single paper invoice is over $10, the cost to process a check ranges between $4-$20. That price increases dramatically when you consider the associated security risk.
Paper checks include a lot of information that is dangerous in the wrong hands, including account and routing numbers that anyone could copy down and use for fraudulent purposes. Checks are also pretty simple to forge. (Remember that DiCaprio movie about the teenage check forger?) Someone with the most basic photoshop and copying skills could easily replicate a check. After all, checks barely changed over the past 30 years. Compromising your suppliers’ bank information won’t take much effort ‒ all it takes is one bad actor with access to a single check.
Checks also change a lot of hands on the way to the bank and may sit for a while before being processed, deposited, and (ideally) shredded. With every minute of delay, the risk of fraud increases. Start thinking about all the ways someone could easily steal that small piece of paper, and you begin to doubt the security of these payment transactions. Most security experts do not recommend paper checks yet they are the most common method of B2B payments today.
ACH is an attractive alternative to paper checks for their ease of use and speed. They are faster and easier to handle than checks, cost significantly less, can be automatic and are remote-friendly.
However, fraud risk remains high due to employee access. It’s fairly easy for an ACH operator employee to alter data in an account and embezzle funds. They may be able to illegally obtain protected data, terminals, or files and use them to misappropriate funds. According to the 2020 AFP Payments Fraud and Control survey report, ACH is of particular interest to fraudsters. Thirty-three percent of financial professionals report that their organizations’ payments via ACH debits were subject to fraud attempts and/or attacks in 2019, which represents a slight increase from the previous year’s survey.
It is up to the bank to set up security measures protecting accounts and customers against fraud on ACH systems. Unfortunately, most banks are stuck in the past and need to make some drastic changes to meet modern-day security requirements.
Compared to putting a check in the mail, wire transfers are considered a safe and fast way to transfer money. The speed comes with a cost: Incoming domestic wire transfers cost around $15, while outgoing domestic transfers range $25 to $30 or more. For some companies it’s worth the peace of mind knowing the payment will get where it needs to be without delay.
However, once a wire transfer is initiated, it can’t be cancelled. (The only exception to this rule is for international wire transfers, which can be canceled within 30 minutes of initiation). For this reason, scam artists try to entice people to wire funds instead of mailing a check or using a credit card. Also, due to the high-dollar, high-risk nature of wire transfers, there is the potential for significant (six-figure and above!) financial losses. Once again, it’s up to banks to implement a strong risk management program over wire transfers. As previously mentioned, most banks are slow-moving institutions and not up to the task of providing sufficient security measures.
Corporate/Commercial Credit Cards
A flashier, much more attractive payment method, corporate/commercial card payments have several advantages: Cash rebates, better control of spend by classifying transactions through card statement analysis, and easier processing of expenses through ERP are some top level benefits. Perhaps the biggest advantage of this method is the reduced security risk through built-in controls like chip technology, spend limits and cash access constraints that reduce the ways in which criminals could misuse your card.
While traditional plastic cards have fewer instances of fraud than other payment methods, a virtual card payment solution gives businesses an even higher level of security that can reduce vulnerability. Each virtual card payment has a distinct 16-digit account number, unique to each payment, allowing for a convenient single-use. It can never be stolen or reused, and your payment is sent securely and directly to your supplier and is accessible only to them. Additionally virtual cards can be used to streamline and automate accounts payable processes.
Smarter Payments Solutions
Automated accounts receivable (AR) and AP payment solutions are increasingly common areas where there are opportunities to boost defenses amid the new normal of remote work. When payments are outsourced to a secure, digital payments provider, this not only gives businesses the flexibility that comes with digitization, but offsets the risks associated with these payment methods. Your finance teams can still control the invoices and approvals via workflows in your ERP, then your secured payments provider will step in to process the payments.
Payment providers, like Finexio, typically make use of best-in-class security tools and practices. Finexio is audited by a PCI-certified auditor and certified to PCI Service Provider Level One, the most stringent level of certification available in the payments industry.
There is a perceived complexity to addressing security concerns through AP payment automation which could easily explain why some businesses are slow to digitize and automate. However, astute CFOs are increasingly eager to invest in innovative payment solutions that can assist in the fight against fraud. As more companies move to fully remote or hybrid workforces, and fraud attempts on accounts payable continue to grow, moving from manual to automated processes have become not only necessary, but critical for businesses that want to successfully navigate disruption and plan for the future.
Want to learn more about how accounts payable automation can help improve your security?