Faster payments mean higher fraud risk: Can your invoice authentication process keep pace?

Many companies are turning to even faster payment methods, such as embedded finance solutions and banking as a service products. In fact, according to a PYMNTS report, more than four out of 10 businesses (41%) are using real-time payments to some degree.

But while switching to these faster payment capabilities makes life better by making B2B payments more efficient, improving cash cycle management and potentially opening additional revenue streams, data from the 2022 Association for Finance Professionals (AFP) Payments Fraud and Control Survey indicates that fraud becomes harder to detect and prevent in the process. For example, respondents that reported fraud via ACH debits increased from 34% in 2020 to 37% in 2021.

And it’s important to note that real-time payments can’t easily be recalled once they’re sent, making resolving fraudulent payments extremely challenging. And with the ACH maximum threshold now at $1 million, there’s a lot more money that can be lost to thieves.

Safeguarding faster payments

Now that payments can be initiated and settled in seconds, it’s even more crucial to verify that invoices and vendor bank accounts are associated with legitimate payees, and not criminals.

The Better Business Bureau recently felt the need to issue a public alert to watch out for bogus invoices for things like office supplies, web services, and even non-existent goods and services. Steps that the bureau said you need to take:

• Take the time to verify all claims for payment
• Don’t give in to intimidation tactics used in demands for payment
• Create a process for invoice inspection before payment
• Train your staff on scam awareness and invoice inspection procedures, and
• Encourage employees to communicate any concerns about specific invoices.

To give you an idea how much of a problem it’s become, between December 2021 and February 2022 invoice fraud was responsible for 55% of the money lost to scams by the small- to medium-size business clients of the financial institution Barclays.

According to AFP, two-thirds of organizations are validating payment beneficiary information, either through their vendors and/or banks (36%) or by using an external service (30%).

However, manual purchase order matching and invoice authentication may not be fast enough to keep up with faster payment types. The solution to protecting your company from faster payment fraud risk may be a tech solution on the market that’s equipped with document and identity verification tools.

Many A/P automation platforms feature enhanced security tools that verify vendors during onboarding and whenever there’s a bank account update request. Some software applications are capable of validating banking credentials both in transit and at rest.