58% of Small and Medium sized Enterprises (“SMEs”) believe that the impact of modern-day payments fraud on their business would be minimal and that they would lose only a small amount of money, according to a new report from Vocalink Analytics.
This is despite recent Action Fraud figures showing that the total amount lost by SMEs to fraud in the UK was estimated at a staggering £18.9 billion[i].
The Vocalink Analytics Small Business Fraud Report[ii] also reveals that over a third of businesses have not even heard of the various types of payment-related fraud in the UK such as invoice redirection, mandate and CEO fraud.
Alarmingly, the 2017 Small Business Fraud Report found almost no improvement in payments fraud awareness amongst SME business owners, entrepreneurs and board members: in 2016, 32% were unaware of this type of fraud and this barely moved in 2017 to 31%.
When it comes to whether payments fraud threatens their operations, 57% of SME owners and 56% of board members stated that they didn’t believe invoice redirection, mandate and CEO fraud were a genuine risk to the business. In 2016, this was 48% of business owners and 57% of board members. However, for companies that have experienced fraud, it is a different story. 71% of SMEs that have been victims of payments-related fraud believe that it is now the biggest risk to their business, and 71% also worry that it will be an even bigger issue for them in 2018.
The research also found that almost half of SMEs (47%) have not made any changes to their business to prevent payments fraud. However, for those SMEs that have been unsuccessfully targeted by fraudsters, 52% state that they have made changes. For those that have been victims, this jumps to 74% confirming that, once businesses have experienced fraud, they understand the risk and resulting impact and will take action. Surprisingly, although 74% of SME fraud victims have made changes to their business to prevent payments fraud, 54% still haven’t implemented a specific policy to double check invoice details.
Gary Kearns, Executive Vice President of Vocalink Analytics (a Mastercard company) comments:
“The latest Vocalink Analytics Small Business Fraud Report shows a worrying lack of awareness of and concern for the potential impact of payments fraud amongst UK small and medium sized businesses. No business is too large or too small to be targeted by potential fraudsters, and despite official figures estimating the billions of pounds lost to businesses every year, SME owners, entrepreneurs and board members are not taking the necessary action to protect their businesses - whether that is checking invoices, educating their teams or introducing new technologies.”
Despite 28% of SMEs claiming that they knew a business that has been a victim of fraud, and that the business lost thousands of pounds as a direct result, 49% of UK SMEs seem to be in denial that the financial consequences of payments fraud could be catastrophic, still believing that losing clients or staff members is a bigger risk to their business.
Gary Kearns, continued:
“Recent stories and high profile cases have demonstrated that fraudsters are successfully tricking businesses into sending an invoice payment to the wrong people. While there are actions that managers, owners and Board members can be taking now to protect themselves, we want to reassure the business community that Vocalink Analytics is working to help identify and flag potential incidences of payments fraud. Our Corporate Fraud Insights solution has already foiled fraudulent attacks in both private and public sector organisations across the UK, and through our state-of-the-art technology, we continue to develop new insights that will help the UK to effectively tackle the issue of payments fraud.”
Contributed | what does this mean?