Payment fraud is not only on the rise but is also hitting US companies hard.

According to a new research survey of more than 260 senior finance and treasury leaders conducted by Trustpair, 36% percent of US organizations lost more than US$1 million on average and 25% experienced financial loss exceeding $5 million.

Furthermore, business relationships are at risk, with two-thirds (66%) of US companies indicating that they would stop doing business with an organization that fell victim to payment fraud and lost their payment, as per Trustpair’s study.

Trustpair’s research report titled Fraud in the Cyber Era: 2024 Fraud Trends and Insights,  highlights the potential domino effect that fraud can have, extending beyond direct financial losses. An equally concerning fact outlined by the report that is likely to keep corporate treasurers and finance chiefs up at night is, “Not only are fraudsters more aggressively targeting large companies, but they’re also extremely successful.”

The report further revealed that the driving force behind the spike in cyber fraud, includes hacking, deepfakes, voice cloning, and highly sophisticated phishing schemes.

Trustpair’s study report uncovers the biggest fraud risks, challenges and opportunities that US enterprises are up against. Key takeaways include:

Spike in payment fraud

With cybercrime and fraud becoming intertwined, the task of detecting payment fraud is getting increasingly challenging.

“Cyber fraud is more complex to identify and goes undetected longer. This amounts to larger sums lost through fraud: fraudsters act in the dark and act multiple times before they’re spotted”, said Baptiste Collot, Co-Founder and CEO of Trustpair.

This may explain why last year, “Fraud hit US companies harder than ever before” with a 71% increase in payment fraud attempts on US businesses in 2023 compared to 2022, as indicated by Trustpair’s survey report.

                                                Payment Fraud is Surging

Source: Trustpair’s report Fraud in the Cyber Era: 2024 Fraud Trends and Insights

The report further added that “Ninety-six percent of U.S. companies were targeted with at least one fraud attempt in the past year. Ninety percent of those companies were hit with at least one successful attack.”

While US businesses are cognizant of the fraud risks, Trustpair’s research points to these organizations being trapped in the “It won’t happen to me” mindset. This is certainly a cause for concern.

Lee-Ann Perkins, Assistant Treasurer at Ankura and Nacha Advisory Board member, who collaborated with Trustpair on the fraud report, sounds a note of caution, stating, “I think fraud will increase because we're not paying enough attention. And until we take it seriously, implement systems, and do everything we can to prevent fraud, it will increase. To be in a world with less fraud, it's going to take concerted efforts from all companies, from all payment providers, and from anyone who's dealing with sensitive information.”

Business relationships face potential risks

While a significant majority of C-level finance and treasury leaders express their willingness to discontinue business dealings with an entity that experiences payment fraud and loss, the financial impact from payment fraud isn’t the sole concern for these executives.

The apprehension of reputational damage weighs heavily on them, especially in relation to customers (51%), investors (50%), and suppliers and vendors (45%). “This can harm business further with significant loss of business activity in the long run”, the report mentions.

Additionally, in the case of vendor fraud (47%), one of the top three types of fraud, fraud perpetrators divert vendor payments to their accounts, resulting in vendors not getting paid on time - or at all. This can create friction in the buyer-supplier relationship, as noted in the report, possibly leading to consequences that extends beyond financial loss, such as tarnished associations.

Top defence measures to fight payment fraud and cybersecurity risks: training and education

While the treasurer is thought of as the superintendent of payment security, and the corporate treasurer’s pivotal role includes spearheading the education of interdepartmental staff on payments security and fraud prevention, treasury is also the department that is most likely to detect both attempted and successful payment fraud activity.

With payments and payments innovation experiencing rapid growth, criminals today continuously explore and innovate, seeking new opportunities for committing payment fraud.

This underscores the importance for organizations to conduct regular and focused payments security training (securetreasury.com) for their employees. This strategy aims to develop an informed workforce capable of comprehending the growing complexity and improving their ability to prevent, detect and respond to payment fraud.

To harness the collective power of the workforce to reduce the costly impact of payment fraud losses, training and education around payment fraud risks and cybersecurity risks (42%) are seen as “Top defense measures to fight fraud at 43% of companies,” as per the findings of the Trustpair report.

   Training, Education, and the Main Challenge in Combating Payment Fraud

Source: Trustpair’s report Fraud in the Cyber Era: 2024 Fraud Trends and Insights

The report goes on to state that “Companies have put this in action over the last 12 months: 40% have invested in fraud training and 80% in cybersecurity training.” Despite this, the predominant challenge identified by US businesses in eliminating fraud (cited by 49% of organizations) is employees failure to adhere to fraud prevention policies.

While training is imperative, the report reckons that increasing automation will be the most beneficial measure to reduce organizational payment fraud. Thus, recognising the inherent value of automation in fighting fraud, “34% percent of companies say they use automated account validation tools to validate vendors, compared to 17% a year ago”, the report reveals.

Conclusion

Sixty-seven percent of US companies expect payment fraud to rise further in 2024 – and most aren’t prepared, cautions the Trustpair report.

With highly skilled bad actors actively targeting large companies and given their ability to slip under the radar, it is necessary for US corporations to bolster their employees defences by staying invested in payment fraud training, increasing automation and fraud prevention technology budgets, performing cybersecurity due diligence across all tiers of their organization’s supplier network, and embracing fraud risk analytics solutions.

These measures will help them fight back against cybercriminals in 2024 and beyond, protect their reputation, and safeguard their business relationships.