Bottomline has revealed that the shift to hybrid working has left businesses seriously exposed to insider fraud[1], with over half of businesses (52% in GB and 63% in the US) falling victim over the last year.
These levels are likely to be significantly higher as many businesses are unaware that they have fallen foul of insider fraud, with rates expected to increase further as hybrid working becomes a permanent workplace fixture.
The findings stem from Bottomline’s seventh annual Business Payments Barometer, which for the first time tracks the sentiment of US businesses, alongside their GB counterparts.
Across the board, businesses of all sizes in GB and the US have been seriously hit by fraud, with estimated losses up significantly. This is especially true for small and medium-sized GB businesses who saw fraud losses rise to 53% and 63% respectively, following a decrease in fraud losses the year before.
In both GB and the US, only 32% of fraud losses are recovered on average, and worryingly, only 2% of small businesses in GB recovered more than 50% of their losses.
Faced with this significant increase, the industry is fighting back against the fraudsters. The roll out of Confirmation of Payee (CoP) in the UK is helping to stop the rise of Push Payment Fraud, which has taken over card fraud as the biggest issue in the industry, with losses of £355 million estimated for H1 2021 in the UK[2].
Worldwide, the adoption of ISO 20022 to strengthen fraud controls is well underway, with 75% of businesses in GB and 84% in the US saying they have a plan for the transition to ISO 20022 over the next three years.
“Businesses, especially SMBs, have been seriously caught off guard by Covid-19 and hybrid working, leading to an unprecedented wave of fraud that hasn’t been seen for years,” said Paul Fannon, Managing Director, Global Business Solutions at Bottomline.
“If we are to reverse this worrying trend and stop fraudsters in their tracks, the industry needs to work together to accelerate the roll out of initiatives such as CoP in the UK and educate businesses on how they can detect fraud before it’s too late.”
International payments rebound following Brexit and Covid-19
Following a steady decline year-on-year due to concerns around Brexit and Covid-19, international payments appear to be slowly recovering in GB with 73% of businesses currently making outbound international payments – up from 69% in 2021.
Despite this, many businesses are still having difficulty tracking payments (39% in both GB and US), and international payments continue to fail due to suppliers not passing sanctions checks (19% in GB, 35% in the US).
This trend is likely to increase over the next year due to the ongoing crisis in Ukraine, which has led to a rise in sanctions. Interestingly, 68% and 75% of businesses in GB and the US respectively have indicated that they are willing to take on more responsibility from the banks for sanctions checking to help ease the burden.
To help manage these challenges, businesses will need to adopt technology solutions that ease the tracking of payments, such as the SWIFTgpi Tracker, and deal with the mountain of sanctions that are becoming more prominent and complex by the day.
In addition, businesses are starting to show interest in Central Bank Digital Currencies (62% in GB and 76% in the US), which have the potential to revolutionize cross-border payments and solve these pain points by making them quicker, cheaper, traceable, and more efficient.
While less than half of GB businesses expect to use blockchain, cryptocurrency or CBDCs in the next 3 years, two in three of their US counterparts plan to use blockchain to facilitate payments within the same time, specifically smart contracts.
The shift to a cashless society continues
The pandemic has accelerated the shift towards a truly cashless society as businesses have been forced to accept digital and contactless payments.
In the last year alone, 53% of GB and 63% of US businesses began accepting new payment methods, a figure which is highest amongst large enterprises (90%+ in both GB and the US).
In contrast, cash is increasingly on the decline, with 22% of GB and 26% of US businesses no longer accepting cash, a figure which rises to 34% amongst large US businesses.
Payment innovation is growing across the industry, as new methods rise to fill the gap in the market. The adoption of mobile payments, primarily in the retail sector, continues to rise globally (33% in GB and 28% in the US).
Alternative payments are also on the rise, such as Buy Now Pay Later (BNPL) which has steadily increased in popularity, especially in the UK where 18% of GB businesses now accept it as a payment method – up from 15% the year before.
With all the hype and media attention around cryptocurrencies, businesses are slowly but surely starting to show interest, with 45% of GB and 65% of US businesses stating that they are likely to adopt cryptocurrencies for payments in future.
“Covid-19 has led to one of the biggest changes to the global economy and society in more than 50 years. Now, everything is digital-first, and if businesses are to survive and thrive in this new digital economy, they must embrace digital payments.
Innovative firms should start exploring how new payment technologies and initiatives will impact them and the industries in which they operate going forward”, said Craig Saks, Chief Executive Officer, Bottomline.
Cashflow and liquidity remain critical for companies
As we emerge from the pandemic, companies have stated that cashflow remains critical as 69% of businesses in GB and 73% in the US state that receiving money quickly has never been more important.
An increasing number of businesses in GB (22%) and US (21%) are no longer accepting cheques as a form of payment – up from 17% in 2021, as businesses continue to phase out more traditional payment methods after being forced to accept new, digital payment methods during the pandemic.
The willingness of businesses to investigate changing payment terms to maximize cashflow has increased significantly in GB (64% in 2021 to 70% in the 2022), a figure which rises to 76% for US businesses.
However, smaller firms have indicated that this is not a real option to relieve cashflow issues, with 60% of GB businesses stating that they do not have the capacity to carry this out compared to large and enterprise organizations.
On the technology front, only 26% of large and 30% of enterprise businesses in GB are investing in automated treasury management systems, which increases to 36% for both large and enterprise within the US.
This is surprising since such solutions give companies of this size accurate, real-time views of all cash positions across all accounts, banks, currencies, countries and more.
Businesses are also turning to real-time payments to resolve cash flow management issues. In the US, 60% of businesses claim to have adopted real-time payments, and a further 25% state that they will adopt such in the next year.
In GB, just under half of businesses (48%) indicated that they are currently using real-time payments, with year-on-year adoption remaining steady at 35%.
[1] Insider fraud is a type of threat that comes from the inside of a company i.e. a current or former employee, contractor or business partner
[2] UK Finance: https://www.ukfinance.org.uk/system/files/Half-year-fraud-update-2021-FINAL.pdf
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