Learn about measures small businesses can take to better protect themselves from the rising threat of payment fraud.
Small business owners face many challenges when running daily operations. Navigating uncertain economic conditions, maintaining a well-trained staff, and pivoting to shifting consumer preferences are common concerns. What’s often less visible, but potentially just as impactful, are exploitation threats. More specifically, payment fraud.
According to the 2024 Association for Financial Professionals (AFP) Payments Fraud and Control Survey Report, 80% of organizations reported they were victims of payment fraud in 2023 – an increase from 65% reporting the same in 2022.[1] The most affected industries included financial services, healthcare, professional services, and manufacturing. For entrepreneurs with limited technology and security budgets, effective strategies that don’t break the bank are needed to thwart fraudsters.
Understanding Payment Fraud
Payment fraud encompasses a range of nefarious activities financial scammers use to take advantage of business owners or their customers. Identity theft, point-of-sale credit and debit card fraud, and hacking into accounts, such as email accounts, to redirect payments from customers into the hacker’s account are examples.
The major drivers of increased payment fraud are lower barriers for entry to new would-be fraudsters, a large victim pool of businesses that don’t have sufficient protection, and challenges in law enforcement for these types of crimes. Barriers to entry are dropping as criminals now offer “Fraud as a Service,” where more sophisticated criminals are “franchising” their tactics to other criminals for a price. Individuals and groups engaging in Fraud as a Service often take advantage of the dark web to preserve their anonymity and use cryptocurrency for payments to evade detection.
The democratization of financial crimes is visible through the prevalence of fraud committed via phishing scams, money laundering and mule account services, account takeovers, and business email compromises.[2] Fraud as a Service is a serious emerging threat as criminals craft new methods to scam small businesses. As the attacks increase, payment fraud prevention tools and processes are even more critical to businesses of all sizes.
Firms most at risk often lack basic cybersecurity defenses. The good news is that the application of simple measures can make a big difference in making your business unattractive to these criminals.
Protecting Your Business: A Proactive Approach
Combating would-be fraudsters requires an assessment of your blind spots and an action plan to increase vigilance and establish greater defenses against these types of threats. Here are some of the recommended strategies to safeguard your business:
1. Implement Strong Authentication Protocols
Two-factor authentication, biometrics, and secure payment gateways are common features. It might take some getting used to, but the effort is worth it to protect your business and customers. Don’t overlook seemingly simple targets like your email systems.
2. Regularly Update Security Systems and Alerts
Staying a step ahead of fraudsters is never a one-and-done proposition. Routinely reviewing your digital security software, including firewalls and anti-virus programs, is vital if you want to stop cyber crooks. You and other key employees can also establish real-time alerts so that if a breach occurs, damage is limited.
3. Use Secure Payment Systems
Ensure that your payment systems are secure and comply with industry standards. Harness and apply encryption technology to protect sensitive payment data.
4. Monitor Transactions Regularly
Stay on top of all financial transactions and look for unusual patterns, such as large or unusual money movements, or transactions from unfamiliar accounts. Consider additional reviews for any changes to a supplier’s account information.
5. Make It a Company-Wide Focus
Train your employees in best practices when it comes to detecting payment fraud. That includes keeping a watchful eye on outgoing payments, verifying counterparties, and implementing internal controls, such as limiting transaction amounts and restricting certain types of merchants. Routine training sessions may help reduce the risk of your business falling victim to payment fraud.
6. Monitor Financial Accounts
Investing in real-time monitoring systems to respond to suspicious activities can help your company be proactive when fighting potential fraud situations. Tracking cash flows manually might simply not be possible, and that’s where automation can be a powerful tool. Fraud scoring systems and account alerts designed to fit your firm’s characteristics can go a long way toward shielding your business from financial peril.
7. Partner Up
You might feel that preventing payment fraud is a daunting task, but you don’t have to go at it alone. Teaming with a PNC banker who has experience helping small business owners navigate challenges can deliver peace of mind in today’s uncertain cyber landscape. PNC’s fraud prevention tools and resources are designed to provide comprehensive solutions tailored to your business needs.
The Best Offense Is a Strong Defense
Small business owners must understand and work to prevent so many business risks. Emerging threats include financial crimes and payment fraud. PNC understands the unique challenges you face, and our fraud prevention tools, including PNC Account Verification, can help mitigate payment fraud risk by providing additional assurance that the account you are sending payment to is owned by the intended party. PNC is committed to providing security and peace of mind entrepreneurs need so they can focus on growing their business.
Visit our Security & Privacy Center for more information on ways to protect yourself and your business.