In a recent blog, we reviewed ways that digital payments can help streamline financial operations for organizations. But the benefits of digital payments extend beyond just efficiency. They can also enhance security and fraud reduction, which are considered by many organizations to be the main drivers for digital transformation within the B2B payment ecosystem. In the last 24 months, nearly half of organizations worldwide have experienced some form of fraud, costing tens of millions of dollars for some. In this follow-up blog, we take a closer look at the added security and fraud reduction capabilities that digital B2B payments can provide.
Strengthened security measures: Traditional payments such as paper checks or Automated Clearing House (ACH) payments, the go-to standard used for electronic funds transfer (EFT), can be vulnerable to a wide array of security risks, including fraud, human error, check tampering, interception, and unauthorized access.
Scammers frequently use the risk of ACH to their advantage. Once malicious attackers have access to account information, including the bank account number and routing number, they are able to use this information to carry out fraudulent and unlawful debits from the account. In addition, if an error is made when entering, sending or processing the payment, funds can still be transferred, which can be another point of exposure. There is no middle party responsible for detecting fraudulent activity when a payment is made. An innocent mistake or fraud could make the entire balance of a business checking account open and available in a moment’s notice.
By adopting digital payment processes, businesses can implement robust security measures that fortify their payment methods. Secure payment gateways, encryption technologies, and multi-factor authentication protocols significantly reduce the risk of data breaches and unauthorized access to sensitive financial information. Furthermore, digital payments enable the implementation of advanced fraud detection algorithms and real-time monitoring, which enhance security and protect against emerging threats.
Mitigation of fraudulent activities: Fraud poses a significant threat to businesses across industries, with B2B transactions being particularly susceptible. In fact, 98% of B2B firms have reported fraud attacks since 2021, estimating an average loss of 3.5% of their annual revenue.
Digital payment systems provide a powerful arsenal of tools to combat fraudulent activities effectively. The ability to track transactions in real time enables businesses to identify suspicious patterns and swiftly respond to potential threats. With the integration of artificial intelligence and machine learning algorithms, businesses can analyze vast amounts of data to detect anomalies and indicators of fraud, such as unusual payment amounts, irregular frequency, or suspicious recipient accounts. By proactively identifying and addressing fraudulent activities, businesses can protect their financial well-being and safeguard their relationships with vendors.
Meanwhile, vendors in this space can offer secure payments against outside threats by providing vendor onboarding that uses proven digital identification methods. Solutions like multi-factor authentication can prevent account takeovers or unauthorized charges along with secure networks that use state-of-the-art encryption.
Enhanced compliance and regulatory adherence: Compliance with industry regulations and adherence to stringent payment standards are critical aspects of any business operation. Using manual, legacy fraud prevention measures in this area can actually do more damage than good due to either not being up to date with the latest regulations or because of an input error. Digital B2B payment solutions offer built-in compliance features that facilitate adherence to regulatory frameworks such as the Payment Card Industry Data Security Standard (PCI DSS) and General Data Protection Regulation (GDPR). Implementing secure digital payment processes allows businesses to streamline their compliance efforts, reducing the risk of penalties, legal issues, and reputational damage.
Streamlined dispute resolution: In traditional payment systems, resolving payment disputes can be a time-consuming and cumbersome process. However, digital B2B payment solutions provide businesses with streamlined mechanisms for dispute resolution. Detailed transaction records, audit trails, and secure document sharing enable prompt identification and resolution of discrepancies. Additionally, digital payments offer improved transparency and accountability, reducing the likelihood of disputes and enabling businesses to maintain healthy relationships with vendors. For example, a recent PYMNTS study showed that more than half of organizations implementing manual security and anti-fraud solutions failed to accept new accounts due to fraud dispute concerns, compared to 31% of those using automated technology.
Trust and confidence in business relationships: Today, the number one challenge B2B companies say they face is identifying business-to-business (B2B) fraud, followed by understanding financial risks . Without a good, reliable financial reputation it will be infinitely more difficult to win new business and maintain vital vendor relationships. By prioritizing security and fraud reduction in B2B payment processes, organizations can demonstrate their commitment to maintaining trust and fostering strong relationships with vendors. Switching to digital payment methods sends a clear message that an organization is dedicated to protecting its financial transactions and ensuring the security of its partners' sensitive data. Such a commitment builds confidence, positioning companies as reliable partners and reducing the risk of reputational damage.
Digital payment systems are becoming operational table stakes for mid-size and large companies. Over 83% of B2B buyers stated that a smooth payment experience is a top priority when choosing a supplier. In the pursuit of enhanced efficiency, cost savings, and a competitive advantage, organizations must recognize the critical role of security and fraud reduction in their transition to digital B2B payment processes. By implementing robust security measures, leveraging advanced fraud detection technologies, and streamlining compliance efforts, organizations can protect their financial assets, mitigate the risk of fraud, and cultivate trust in their business relationships. Embracing digital payments as a secure and reliable solution empowers businesses to thrive in an increasingly digital and interconnected world.
Learn more by visiting our Digital Integrated Payments Hub.