How Paperless B2B Payments Are Reducing Fraud in Business Transactions

If all goes well, the future of business processes won’t look anything like its past.

And that holds particularly true in business-to-business (B2B) payments, where the past — and even the present — is riddled with manual processes, paper-based workflows and legacy inefficiencies. And those three realities can ladder up to one big problem: payments fraud.

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“A lot of fraud is in the checks. If you cut out checks, you cut 60% of fraud right there,” Ernest Rolfson, founder and CEO of Finexio, told PYMNTS for the series, What’s Next in Payments.

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“It’s crude and manual … but to not send paper checks, you have to have great electronic options to make it easy to not send or receive paper checks,” Rolfson said, noting that Automated Clearing House (ACH) fraud is also a growing problem area, as fraudsters get better at exploiting the outdated security features of ACH.

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“ACH is a 50-plus-year-old technology that is completely bare bones and has little to no security methods around it,” he said. That makes the digital transformation of B2B payments, particularly the embrace of accounts payable (AP) automation, not just an opportunity but a necessity.

Combating Fraud With Automated AP

As Rolfson highlighted, Finexio’s own infrastructure-as-a-service platform specializing in AP automation and integrated B2B payments enables businesses and platforms to deliver payments efficiently and securely, embedding the entire payment process within the AP workflow.

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This integration addresses a gap in the industry: the disconnect between AP workflows and payments, which has often left businesses vulnerable to inefficiencies and fraud.

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Fraudsters “will call your back-office staff who are not trained in payments fraud prevention and try to communicate false information over the phone. And these staffers, they are great, smart, hardworking people, but they do not have the tools and that is why the fraudsters are attacking them,” Rolfson said.

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That’s part of the reason, he added, that Finexio has launched Finexio Shield, an additional layer of fraud protection coverage on top of the account validation, know-your-customer (KYC) and know-your-supplier (KYS) processes, anti-money laundering (AML) compliance and real-time transaction monitoring that is already provided to all Finexio clients today. Finexio Shield is a separate change management and validation process that offers a guarantee against fraud.

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These tools and payment innovations also feature a rigorous yet easy-to-implement change management and validation process, crucial for preventing fraud attempts that target procedural weaknesses, such as unauthorized changes in payment information.

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“Fraud is the biggest and most important thing we hear from customers today in B2B payments,” Rolfson said.

Leveraging Innovations

Looking ahead, Rolfson emphasized the need for businesses to embrace digital transformation fully, particularly in eliminating paper-based processes. He argued that the shift to digital payments is not just about adopting new technologies but also about changing organizational mindsets and demonstrating the courage to innovate and achieve a paperless operation.

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“Our clients care about driving business results and analytics around understanding the value and transparency of every transaction,” he said. “They want more automation, as much as possible, and they want no fraud.”

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And another innovation being brought to market is Finexio’s Card by Mail program, which boosts the adoption of virtual cards — a more secure and efficient payment method compared to traditional checks. This initiative is particularly important because it targets the substantial portion of businesses that still rely on paper invoices and checks. The Card by Mail program allows more suppliers to be reached, even those for whom they only have a physical address, thereby facilitating the transition to digital payments.

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“We are laser focused on destroying the check, eliminating fraud risk, and delivering more card,” said Rolfson, noting that “there are so many businesses now that are just still learning about virtual card. It is the fastest growing payment method.”

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Artificial intelligence (AI) plays a role in Finexio’s operations, particularly in optimizing supplier enablement and payment delivery. By leveraging AI, Rolfson said, the company achieves over 90% accuracy in predicting the ability of suppliers to accept virtual cards, which enhances both security and efficiency. This capability allows Finexio to minimize manual intervention, reduce costs, and improve the overall customer and supplier experience.

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Finexio’s impact on the B2B payments landscape is already evident, he said, with their clients reporting reductions in fraud and increased efficiency in their payment processes. As the industry continues to evolve, Finexio is committed to solutions that address the challenges of B2B payments.

First published by PYMNTS |  August 30, 2024