Businesses Incur Greater Losses Year-On-Year Due To Payment Fraud

Bottomline 2020 Business Payments Barometer reveals: 

• Only 1 in 10 small businesses report recovering more than 50% of losses due to fraud
• Despite an increase in new payments initiatives and regulations, just 59% of businesses feel prepared for Open Banking – down 8% from 2019
• Accelerating digitisation is crucial to navigate challenges posed by COVID-19 pandemic 

Bottomline (NASDAQ:EPAY), a leading provider of financial technology that makes business payments simple, smart and secure, revealed today that 58% of financial decision makers in businesses surveyed across Great Britain view financial loss due to payment fraud as ‘part and parcel of running their business.’ Of those surveyed, 81% were unable to recover more than half of their losses caused by fraud, a figure which rises to 88% for small businesses alone. 

With COVID-19 related fraud scam cases on the rise, small and medium businesses continue to lose more money over time due to payment fraud – their total losses having increased by 14% and 38% respectively from 2019 to 2020. In comparison, decision-makers at enterprise organisations recorded a 4% decrease in 2020, with total fraud losses dropping from £349,077 in 2019 to £336,408 in 2020. 

The findings stem from Bottomline’s fifth annual Business Payments Barometer, which reveals that whilst the money lost due to fraud has increased, individual occurrences have decreased. The number of respondents indicating that fraud impacted their business has dropped from 45% in 2019 to 34% in 2020, with the reduction greatest among large corporates and enterprise organisations, who reported a 22% and 25% drop respectively in fraudulent cases versus 2019. This can be attributed to the fact that big businesses are more likely to use automated payment protection measures than their smaller business counterparts.

Real-time payments hit a bump 

Despite last year’s Payments Barometer indicating that over one third (37%) of respondents were planning to adopt real-time payments within their businesses in the next 12 months, the results from 2020 paint a slightly different picture. Claimed usage among respondents remains flat, with 53% in 2019 and 50% in 2020 saying that they are using real-time payments regularly. 

In light of the current uncertainty, businesses are likely concerned that real-time payments come with real-time fraud problems, such as checks around Authorised Push Payment (APP) fraud or human error. This fear may underscore why some businesses are not considering real-time payments to service more general outbound payments, and why they are not using the technology to its full potential. In fact, a number of decision-makers indicated that their companies only use real-time payments to fulfil routine requirements such as: making payroll payments (45%), paying taxes (46%), or paying regular invoices from suppliers (48%). That said, an overwhelming majority of 89% said their businesses continue to pay suppliers late, a slight, but disappointing improvement from 92% in 2019.

“Late payments can have a critical impact on businesses and in time of crisis such as the current COVID-19 pandemic, smaller players simply can’t afford the repercussions,” said Nigel Savory, Managing Director, Europe, Bottomline. “Given the range of payment methods available such as real-time payments, the prompt payment code, ‘duty to report’ legislation and sensible business practice to maintain continuity of supply, there is no reason why small businesses should be placed at any additional risk from larger corporates hoarding cash reserves. In fact, our Barometer results show that 67% of current real-time payments users note that it can help them with cash-flow management and unlock cost savings.”

Manging international payments during times of crises

The survey data suggests that international payments are likely to decrease across businesses as well. Down four percentage points on 2019’s research, just under half (49%) of financial decision-makers plan to continue making international payments, with 23% planning to stop altogether and only 14% suggesting they will start making international payments in the next 12 months.

Beyond the impact of Brexit coming into force towards the end of 2020, the downturn in international payments reflects the complicated processes and friction that businesses are facing. Just under half of decision-makers suggested they face difficulties tracking their payments (44%) or paying international suppliers on time (43%).

It is promising, however, that 20% stated their reason for halting payments was due to international suppliers failing sanction checks, suggesting that businesses are starting to own up to their role in the sanctions process as they take on more responsibility that has historically laid with the banks alone.

While 70% of financial decision-makers agreed that responsibility for sanction checking was with the banks in 2019, the figure dropped to 56% in 2020. Businesses are more prepared to share the load, with 71% suggesting they are happy to take on more responsibility for implementing anti-money laundering regulations. However, there is some variation by business size, with 79% of decision-makers in enterprise organisations more willing to share the responsibility, compared to 62% of decision-makers at small businesses.

Role of technology set to accelerate in a changing world 

The Barometer also shows a clear acceleration towards digitisation. As businesses look to manage the ongoing impact of the COVID-19 pandemic, this becomes even more critical. It is evident that this trend has been emerging for some time, with mobile payment technologies topping the list for the second year in a row as most likely to have the greatest influence on payment processes over the next 12 months. Easier access to technology also jumped up the rankings from fifth to second place.

This could, in part, be influenced by financial decision-makers’ expectations and experiences around the ‘consumerisation’ of business payments, a trend observed in last year’s report. Whilst regulators were stepping in to drive Open Banking and PSD2 forward in the effort to make it easier for businesses and consumers to use tablets and smartphones, the 2020 report finds that businesses still feel unprepared for these new initiatives. Only 59% of respondents currently feel ready for Open Banking, down 8% from 2019.

It is clear that more support and education around the benefits of these initiatives is needed,” said Savory. “There is an opportunity for banks and technology solution providers to fill this void and help businesses understand what actions they need to take and the role they can play in delivering longer-term transformation to the industry. As we continue to navigate the current COVID-19 pandemic, businesses most able to embrace digitisation, personalise customer experiences and adopt technology that engages intelligently with its customers will be in a strong position for the future.”