As B2B transactions increase in scale and complexity, they’re also becoming prime targets for fraud. Scammers exploit weaknesses in corporate procure-to-pay processes by using increasingly sophisticated tactics. As a result, 96% of U.S. companies have suffered attempts at or been subject to payment fraud, leading to billions in annual losses.
Traditional security measures are weak against constantly evolving fraud. Software and online services businesses need AI-driven fraud detection, real-time transaction monitoring, and advanced decision transparency. Read on to learn the B2B fraud prevention strategies you can use to secure your business’s financial integrity, reputation, and partnerships.
Consequences of B2B Payment Fraud on Your Internet & Software Business
Payment fraud leads to both the loss of revenue and lost business due to broken vendor relationships. Here’s how they can impact your business:
- Operational Challenges: Fraud investigations drain valuable resources from internal processes, disrupt workflows, and demand costly system updates that can lead to downtime, and other usability issues.
- Chargebacks and Refunds: When a transaction is disputed, businesses have to go through the costly process of investigating and resolving the issue. Frequent chargebacks can strain cash flow, hurt legitimate sales, and even impact the business’ standing with payment processors.
- Client Churn: If clients experience unauthorized transactions or security breaches, they will not trust the business. This distrust may lead them to cancel contracts or subscriptions. High churn rates can also harm the company’s reputation and make it harder to attract new clients.
- Compliance Issues: SaaS businesses handle sensitive customer data such as payment, personal, and legal information. Fraud can lead to a breach that leaks this sensitive data. Doing so leads to compliance violations with regulations like GDPR or CCPA, resulting in heavy fines and penalties.
Industries Most Vulnerable to B2B Payment Fraud
Certain industries are at higher risks of payment fraud due to the sensitive nature of the data they process. Let’s take a closer look at some B2B internet and software industries that are in the crosshairs of today’s scammers:
- Enterprise Software and Technology: Fraud risks in this segment arise from subscription models, licensing fees, and integration payments. The recurring nature of these transactions makes them attractive to fraudsters who exploit weaknesses in payment systems or account security. The complex ecosystems of software providers often involve multiple integrations and third-party vendors, and that can obscure fraudulent activity, making detection more challenging.
- Telecommunications Providers: Telecommunications companies manage vast networks of vendor and customer transactions, making them likely targets for fraud. Fraudsters often exploit these systems through unauthorized account access or service reselling.
- Training & Certification Platforms: The professional training and certification sector are susceptible to fraud because they process subscriptions, online course transactions, and tuitions. Fraudsters may exploit systems by using stolen payment methods or manipulating accounts to gain unauthorized access.
- Human Resources (HR) and Payroll Software: HR and payroll systems are prime targets for fraud, particularly through payroll manipulation. Fraudsters may alter employee data or create fake employees to divert funds. If sensitive employee information is exposed due to a data breach, it might lead to identity theft or payment fraud.
Ways To Prevent B2B Payment Fraud
According to FBI data, business email scams alone account for over $2.7 billion in corporate losses annually. To stop these attacks, organizations must take the following actions:
- Deploy AI-Driven Fraud Detection Systems: AI and ML models can analyze transaction data to spot anomalies that signal fraud. These systems adapt to new tactics by learning from past patterns to identify unusual behavior like unexpected payment locations or irregular transaction activity. This allows businesses to flag potential fraud early and respond quickly.
- Monitor and Reconcile Accounts Continuously: Using automated tools to continuously monitor accounts can help catch any discrepancies, duplicate payments, or unauthorized transactions. These reconciliation tools compare transaction records with financial statements, ensuring accuracy and highlighting irregularities for immediate action.
- Set Transaction Thresholds and Risk-Based Reviews: Implementing transaction thresholds can set limits on payments that can be processed automatically. Payments exceeding these limits trigger additional checks, such as manual reviews or secondary approvals. Also helpful are risk-based reviews that apply extra scrutiny to transactions flagged as unusual, like those involving unfamiliar vendors or unexpected regions.
- Adopt Multi-Layered Authentication Protocols: Multiple authentication layers, such as two-factor authentication, biometric verification, or one-time passcodes, can make it harder for fraudsters to gain access to systems. These extra steps ensure that only verified users can access the accounts and complete sensitive transactions.
- Leverage a Shared Intelligence Data Network: Consortium risk capabilities allow fraud solution users to benefit from shared intelligence networks. When one business detects a bad actor, other businesses can benefit from this knowledge. This becomes particularly useful when a company sees a unique bad actor for the first time, but one who is exhibiting known behaviors and patterns that are picked up by the global intelligence network.
- Enhance Decision Transparency: Tools that provide clear explanations for risk scores and why certain transactions were flagged can help teams understand fraud decisions. This transparency makes it easier to fine-tune fraud detection strategies, reduce false positives, and maintain trust with clients.
- Use Device Fingerprinting: Device fingerprinting identifies unique attributes like IP addresses, browser details, and device IDs to distinguish between trusted users and fraudsters. Repeated activity from suspicious devices, such as multiple logins from different locations can signal fraud and trigger protective actions.
See how Smartproxy slashed manual review time by 99% and reduced customer support emails by 96% using Sift.
How Sift Prevents B2B Payment Fraud
With the rise of deepfakes and convincing phishing emails thanks to generative AI, B2B payment fraud prevention is the highest priority. Successful attacks can cause billions in losses, disrupt critical operations, and lead to loss of clients. To overcome these threats and secure business-to-business transactions, organizations must adopt systems that offer continuous monitoring and automated threat detection to prevent scammers from breaching your security.
The Sift Platform is designed to tackle the challenges of B2B payment fraud with advanced tools that adapt to evolving threats:
- Real-time fraud detection: Analyzes transaction patterns instantly to identify and block fraudulent activities across every touchpoint.
- Automated decision-making: Reduces operational burdens by automating fraud detection processes, freeing resources for other priorities.
- Account takeover (ATO) prevention: Identifies suspicious activity, such as unusual login attempts, to safeguard sensitive business accounts.
- Improved fraud visibility: Delivers actionable insights into emerging fraud patterns, helping businesses refine strategies and stay ahead of threats.
- Payment method security: Secures transactions by protecting payment data from being exploited by bad actors.
- Enhanced customer experience: Minimizes false positives to ensure legitimate transactions proceed seamlessly, maintaining client satisfaction.
If you’d like to learn more about what Sift can do for you, request a demo today.
