Payments fraud seen as catalyst for AP automation

Operational efficiency has long been the key to selling AP automation, but a growing payment fraud problem and new risk exposures are giving businesses new reasons to digitize payments.

In the past few years, payments fraud activity has been on the rise. The FBI reported that it received 23,775 complaints regarding business email compromise (BEC) related payments fraud with over $1.7 billion in losses in 2019, up from over 20,000 complaints and almost $1.3 billion in losses in 2018, and 15,690 complaints and $675 million in losses in 2017. According to the 2019 AFP Payments Fraud & Control Survey, 82% of financial services executives reported that their organizations had experienced attempted and/or actual payments fraud in 2018, up from 62% in 2014. Also about 80% of executives surveyed in 2018 noted their organization had seeen BEC attempts, up from 64% in 2015.

“The critical piece about payments automation is now about protecting the data and the payment, and less so about digitization, even though accounts payable is the last bastion of paper. ERP systems were not meant to secure data and protect privacy, which in the end creates payment risks,” said Karla Friede, co-founder and CEO of Nvoicepay, a unit of FleetCor.

FleetCor acquired Nvoicepay in March 2019 in a bid to accelerate the digitization of payments and diversify from its large fleet card business. One benefit noted of the acquisition is that by combining the databases of Nvoicepay and Comdata (also a unit of FleetCor), both groups can access over 800,000 suppliers, Friede said. This, in turn, helps reduce the risk of sending a payment to the wrong company.

“Payments are getting more electronic, which is making it more difficult for companies to match funds digitally transferred to the correct receivables, which creates risk,” noted Steve Murphy, director of commercial & enterprise payments at Mercator Advisory Group

In the past, the most common reason to automate the accounts payables process was for better operational efficiency from a system that has largely been paper-driven. However, Murphy noted that business inertia and the difficulty around making a business case were often stumbling blocks in getting companies to automate. “If it’s not broke, then why fix it?” he asked.

However, given the rising reports of payments fraud and attempted fraud, a new business case emerges.

A PaymentsSource 2019 Cross-Border B2B Payments Survey of bank executives found that vendors are promoting first and foremost AP automation solutions over other tech solutions, including real-time payments. Additionally, the survey found that AP automation solutions were the top implemented payables technology in 2019, with about half of their customers saying that they had recently implemented AP automation.

“The awareness to protect against payments risk and payments fraud is growing, and has caught the attention of many business CFOs. We invest in machine learning to match and manage data as well as invest in the security compliance infrastructure so our clients don’t have to do so,” Friede said.