Securing Your Business’s Most Vulnerable Payment Methods

Business | 08.17.2023
It’s no secret that fraud continues to impact businesses of every size and industry daily. According to the Association of Financial Professionals most recent Payments and Fraud Control Report, 65% of organizations surveyed were victims of attempted or actual payment fraud in 2022 - with nearly half unable to recover lost funds. 
While the numbers may seem daunting, we know that one of the keys to protecting against fraud is staying educated about the latest scams and schemes. As your financial partner, Merchants is here to help you understand the common types of fraud and can also work with your business to put fraud management tools in place to help mitigate the risk. Let’s review the top three most vulnerable payment methods for your business, as ranked by the AFP report, and how you can address these vulnerabilities.

Check Fraud

63% of survey respondents reported that their organization faced fraud activity via checks.
While the use of checks as a payment method may be declining, it’s still a favorite of many businesses. In fact, three-fourths of those surveyed said their business still plans to use checks despite the high risk of check fraud.
Check fraud comes in several forms, including writing bad checks, stealing and altering checks or forging checks. One easy way for fraudsters to obtain checks from your business is by stealing outgoing payments from your mail. Once a fraudster finds a payment check, for example one you’ve written out to a supplier to pay for materials, it can be washed and the altered to a different name and amount for the fraudster to deposit.

Tips to protect your business against check fraud:

  • Take your outgoing mail to the post office. AFP’s report noted fraudsters are even stealing mail from post office boxes like the blue ones found on street corners.
  • Only write paper checks when necessary. The fewer checks you write, the less exposure your business has to check fraud. 
  • Take advantage of tools that convert your paper check payments to ACH or Virtual Card payments. You can lower your check fraud risk considerably and create a more efficient process for your finance team.
  • Use a tool like Positive Pay to review payment checks. You can choose to pay only checks matching a pre-approved list or review a list of checks presented to your account for payment against the checks you have issued.
“Plain and simple…writing checks puts a business at risk,” says Nick Benz, Treasury Management Consultant Lead at Merchants. “Each check you write has your business account number and routing number on the bottom, which is all a fraudster needs to commit check fraud or ACH fraud. Being proactive and putting fraud prevention services in place is a great step to help protect your accounts.”

Commercial Credit Card Fraud

In 2022, there was a 10% increase in fraud for payments involving a commercial credit card.
Using a credit card to make payments for your business can be convenient but also presents an opportunity for more fraud. Credit card fraud occurs when your physical credit card or card information is used for unauthorized transactions. The card could have been stolen from your business or an employee, or the fraudster may have obtained the card information and attempt to use it for online purchases.
The AFP report suggests commercial credit card fraud has increased in part because of a return to routine business practices post-pandemic, including regular recruitment efforts and corporate travel where cards would be used more extensively. 

Tips to protect your business against commercial credit card fraud:

  • Store your credit card in a secure location.
  • Set up automatic alerts for each card transaction. With Merchants Bank this can be done by each cardholder through our Credit Card app.
  • Set up company-wide alerts and controls for all your credit cards. Merchants Bank commercial credit card customers can manage cards through an online site, EZ Business Card Management. Our Credit Card Department can setup your business to access the site. 
  • If an employee uses a commercial credit card on a personal device or associates it with a personal website profile to make a purchase, make sure the employee removes the card as a payment option so the card information is not saved.

Wire Transfers

45% of all business email compromise fraud attempts involved a wire transfer as the payment method.
As more business payments go digital, fraudsters continue to target wire transfer payments especially through business email compromise. There are three common ways fraudsters fool a business into a fraudulent wire transfer:
  1. By pretending to be a trusted source like impersonating a co-worker through a fake email address.
  2. By creating a website with a URL similar to one your business interacts with so you believe you’ve reached a legitimate site. The site may download malware to your computer, which makes it easier for the fraudster to watch you process wire payments. From there, the fraudster can gather banking information and passwords to initiate wire transfers themselves. 
  3. By taking over a compromised email account and sending new payment instructions.

Tips to protect your business against wire transfer fraud:

  • Educate all of your staff about the warning signs of business email compromise. It’s not just those on your finance team that need to be aware.
  • Use a dual control process for wire payments so more than one person is involved in processing wire transfers and can verify the work of the other person.
  • Have an internal process in place to verify account information and accuracy through a trusted source, especially when there is a request to change account information for a wire transfer. 
“If you receive an email with wire transfer information, never call the phone number provided in the email itself,” shares Benz. “Fraudsters usually switch out contact information in an email to their own, so you call them instead of the person you’re doing business with. While it’s an extra step to verify contact information, just taking a few extra minutes to do so can save your business from wire fraud.”
Interested in learning more about payment fraud trends from AFP’s report? View the report highlights.
Take a proactive approach to securing your business payment methods. Talk to our Treasury Management team today about custom fraud management solutions to add a layer of security and give you peace of mind.

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