# How can you reduce the risk of fraud in B2B payments?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-22
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Reduce B2B Payment Fraud: Strategies for Success
Meta Description: Discover how B2B businesses can reduce payment fraud with enhanced visibility, digitalisation, alternative payment types, and the use of alternative data
URL: https://financedigest.com/how-can-you-reduce-the-risk-of-fraud-in-b2b-paymentshtml

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![Nicolas Rabinovitch, Head of Data Science & Fraud at Hokodo.](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/nicolas-rabinovitch-450x539-1736814692679-compressed.jpg)

_By_ **_Nicolas Rabinovitch_** _, Head of Data Science & Fraud at_ _Hokodo_ [_._](http://hokodo.co)

Global losses from payments fraud [tripled](https://www.merchantsavvy.co.uk/payment-fraud-statistics/) between 2011 and 2020, reaching a record high of $32.39 billion. That figure is predicted to increase by a further 25% in the next four years, making fraud prevention strategies imperative for all businesses, not least those who deal with B2B customers and so potentially face some of the greatest basket values. But knowing that you need to work on [fraud prevention](https://www.financedigest.com/payroll-fraud-and-how-to-prevent-it.html "Payroll fraud and how to prevent it") and understanding how to do it are two different things.

What steps can B2B businesses take to [reduce payment fraud](https://www.financedigest.com/the-importance-of-a-proactive-and-collaborative-approach-to-reducing-contactless-fraud.html "THE IMPORTANCE OF A PROACTIVE AND COLLABORATIVE APPROACH TO REDUCING CONTACTLESS FRAUD")?

With the UK in recession – and [predicted](https://www.bbc.co.uk/news/business-52986863) to remain so for the whole of 2023 – British businesses face a difficult time. [Increasing the likelihood of B2B suppliers facing defaulted payments](https://www.financedigest.com/payment-community-engagement-in-the-development-of-the-emv-specifications-increases.html "Payment Community Engagement in the Development of the EMV Specifications Increases") and payment fraud. But there are [steps that B2B businesses can take to help protect](https://www.financedigest.com/4-steps-you-should-be-taking-to-protect-data.html "4 Steps You Should Be Taking To Protect Data") their assets.

Enhanced visibility

While no one invites [fraud into their business](https://www.financedigest.com/why-your-business-is-vulnerable-to-supplier-fraud.html "Why Your Business is Vulnerable to Supplier Fraud"), there are some fairly common payment practices that can enable would-be fraudsters to get away with missing payments. And one of them is a lack of visibility in the [payments process](https://www.financedigest.com/are-your-payment-processes-in-cheque-for-the-new-legislation.html "ARE YOUR PAYMENT PROCESSES IN CHEQUE FOR THE NEW LEGISLATION?"). The [businesses with the lowest number of successful payment](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS") fraud cases are those that monitor the payments journey from the issuing of an invoice to the completed transaction. So, create a system where you can easily track each and every invoice, and can see where it is within the [payments process](https://www.financedigest.com/emvco-streamlines-approval-process-for-mobile-payment-devices.html "EMVCo Streamlines Approval Process for Mobile Payment Devices"). This will help you to [identify potential risks](https://www.financedigest.com/legal-entity-identifiers-leis-how-can-banks-minimise-risks.html "Legal Entity Identifiers (LEIs): how can banks minimise risks?"), while improving cash flow, and enabling you to make better decisions as the customer relationship develops.

Go digital

Digitising accounts receivable has become a popular [move amongst larger businesses](https://www.financedigest.com/4-ways-moving-office-can-bring-your-business-roi.html "4 ways moving office can bring your business ROI"). And it is now trickling down to SMEs, simply because, once initiated, it is much more cost-effective, and it can dramatically improve accuracy. Which is better for compliance, and better for [fraud detection](https://www.financedigest.com/the-clues-to-detecting-fraud-are-hidden-in-relationships.html "THE CLUES TO DETECTING FRAUD ARE HIDDEN IN RELATIONSHIPS").

Use alternative payment types

According to UK Finance research, total [fraud loss](https://www.financedigest.com/uk-card-fraud-losses-climbed-18-percent-in-2015-largest-rise-in-europe.html "UK CARD FRAUD LOSSES CLIMBED 18 PERCENT IN 2015, LARGEST RISE IN EUROPE") in the UK reached £1.26bn in 2020. 45% of this was attributed to credit, debit, and other payment cards. An additional 38% came from authorised push payment (APP) scams, where scammers pose as a genuine company the customer is already doing business with, in order to fraudulently complete what would have been a genuine transaction. The most infamous instance of this has been with fraudsters posing as estate agents for the [final transfer of funds following a property](https://www.financedigest.com/10-year-david-goliath-crusade-finally-sees-justice-for-off-plan-spanish-property-buyers.html "10 year ‘David & Goliath’ crusade finally sees justice for off-plan Spanish property buyers") purchase. However, almost all forms of payment can be subject to fraud. The only real way to avoid that risk is to work with secure, [digital payment](https://www.financedigest.com/can-i-please-speak-to-someone-why-building-relationships-is-still-crucial-in-digital-payments.html "“Can I please speak to someone?” Why building relationships is still crucial in digital payments") providers, so the risk is passed on to somebody else.

The use of [alternative data](https://www.financedigest.com/investing-in-the-future-with-alternative-web-data.html "Investing in the future with alternative web data") sources

Credit checking has relied upon the same process for decades. [Businesses use the established credit](https://www.financedigest.com/aon-assists-freddie-mac-to-reach-5bn-risk-transfer-milestone-for-u-s-mortgage-credit-business.html "AON ASSISTS FREDDIE MAC TO REACH BN RISK TRANSFER MILESTONE FOR U.S. MORTGAGE CREDIT BUSINESS") bureaus to check a fixed criterion, which will show them a customer’s creditworthiness based upon their past behaviour.  But while past behaviour is useful to know, this system doesn’t look into a business’s [current circumstances](https://www.financedigest.com/how-a-british-brand-catered-to-hnwis-can-maintain-its-position-within-the-global-luxury-sphere-and-even-grow-in-these-current-circumstances.html "How a British brand catered to HNWIs can maintain its position within the global luxury sphere, and even grow, in these current circumstances"). This can lead to businesses on the brink of administration, that just happens to have an excellent credit history, taking down their suppliers with them. It is now possible to use alternative [data sources – such as open banking data or digital](https://www.financedigest.com/why-data-is-the-best-weapon-in-the-war-for-digital-talent.html "Why data is the best weapon in the war for digital talent") footprints – to prevent that from happening.

Treat every customer the same

In B2B sales, it is easy to become complacent as you build relationships with longstanding customers. But that’s [opening the door to loss](https://www.financedigest.com/wall-street-set-to-open-higher-oil-prices-extend-losses.html "Wall Street set to open higher, oil prices extend losses"), particularly in straitened times. Just because you have supplied a customer for a decade, it [doesn’t mean](https://www.financedigest.com/making-sure-that-finservs-digital-transformation-doesnt-mean-digital-exclusion.html "Making sure that FinServ’s digital transformation doesn’t mean digital exclusion") that they are immune to the fluctuations of the market. So, [it’s prudent to run the same checks every time](https://www.financedigest.com/why-its-time-to-adapt-to-the-virtual-world-how-to-master-online-negotiations.html "Why it’s time to adapt to the virtual world: how to master online negotiations") for every customer. It’s only the [customers that you maybe shouldn’t be trusting](https://www.financedigest.com/how-to-maintain-customer-loyalty-and-trust-in-the-face-of-a-pandemic-and-digital-competition.html "How to maintain customer loyalty and trust in the face of a pandemic and digital competition") who will take offence.

Right now, it is projected that payments fraud will have increased to cost [$40.62 billion](https://www.merchantsavvy.co.uk/payment-fraud-statistics/) by 2027. This is in part because of the difficult economic climate and the impact of global events – the [energy crisis](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out"), and the war in Ukraine. And partly because people are becoming savvier and finding it easier to take advantage of holes in the system. If you [don’t take steps to protect your business](https://www.financedigest.com/pitiless-machines-will-kill-your-business-if-you-dont-respond-now-warns-servion.html "‘Pitiless machines’ will kill your business if you don’t respond now, warns Servion"), you can almost guarantee that the fraudsters will find a way in, whether maliciously, or because they have no other choice.

**_About Author:_**

**_Nicolas Rabinovitch – Head of_** [Data Science & Fraud](https://www.financedigest.com/allianz-benelux-taps-into-modern-data-management-to-combat-fraud-and-foster-a-positive-customer-experience.html "Allianz Benelux Taps into Modern Data Management to Combat Fraud and Foster a Positive Customer Experience")

_Nicolas is leading the Data Science and Fraud team at_ _Leading B2B Buy Now, Pay Later (BNPL) provider Hokodo_ [_._](http://hokodo.co) _He is responsible for developing credit risk models and fraud detection capabilities across all geographies._

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