Regardless of the size or scope of your financial institution, accounts payable fraud is a big deal. While fraudulent activity is a matter of serious concern for any bank or credit union, it can pose some particularly sticky issues for small to mid-sized FIs that depend upon small teams of accounting professionals to run daily operations.
Fraud is especially detrimental to SMBs that differentiate in a competitive, local or regional marketplace on a high level of customer trust, personalization and security.
According to the Association of Financial Professionals (AFP), over 80% of organizations were targets of payments fraud in 2019, the highest percentage since 2009. More recently, IBM Security reported a 6,000 percent increase in cybercrime spam since the beginning of the pandemic.
Fraudulent activity is skyrocketing, and FIs that want to mitigate this risk should recognize that the time for a secure, automated solution that protects against fraud is now.
Fraud Risks for Accounts Payable Departments
Manual AP processing opens FIs to a host of fraud tactics. Although financial fraud can rear its ugly head in many forms, there are a few varieties that are especially prevalent for AP departments at financial institutions.
The Wall Street Journal reports that attempted check fraud rose to $15.1 billion in 2018, an increase from $8.5 billion in 2016. In 2019, check fraud was at the top of the list of payment methods most frequently subjected to fraud attacks.
In fact, 74% of businesses that experienced AP fraud in 2019 were targeted via check, up from 70% in 2018, according to the AFP survey. This is an issue for FIs as 42% of B2B payments are still made by check, according to the same report.
Check fraud is all too easy a game for fraudsters whose nefarious skillsets now extend to far savvier digital breaches. With automated payments, there’s no paper trail for scammers to sniff out. Automating the AP process allows you to completely eliminate paper checks and their associated risks.
ACH payments are another area of vulnerability for FIs. Keeping a centralized, master vendor file allows your team to easily monitor data for red flags or suspicious activity that’s out of sync with pre-determined vendor information, including payment preferences. Vendor verification is a critical safeguard to prevent AP fraud, whether for check, ACH, or credit card payments.
Business Email Compromise (BEC) is another risk of fraud for AP departments. Scammers use this fraud tactic by targeting payments via email to phish unwitting employees within accounting departments. These emails are often “forwarded” or labeled as “urgent” from a C-level manager who requires immediate action — a fraudulent money transfer.
Manage Risk and Prevent Fraud with Automated AP Processing
Automating AP streamlines invoicing and electronic payments, and provides full visibility into the GL with access to real-time payment and vendor data. It also offers enhanced security for sensitive supplier bank account data, while simultaneously mitigating the liability associated with check fraud.
Manually managing vendors (especially across different branches with different authorizing officers) often leads to mistakes, keying errors, and most fatally, exposure of sensitive data that can lead to fraud. Implementing technology that automatically alerts AP departments of suspicious activity is a standout benefit of AP automation in directly fighting fraud.
Accounts payable automation provides the time and cost-saving benefit of centralizing all AP activity in one secure place. With automated AP, every invoice passes through one streamlined platform, providing AP professionals total visibility into every payment in real time. This heightened level of control and visibility makes it easy to detect suspicious activity and flag instances of attempted fraud before they are perpetrated.
Build and Streamline Payment Controls with Automated AP
The ideal solution for automating accounts payable should provide you with the ability to set up payment preferences and controls that are unique to your organization and the needs of your vendors.
Rather than having to pass invoices or purchase orders through different employees at various stages of the process, you can assign individual roles, whether it be for authorizing officers, managers, or anyone within the finance department responsible for approving any portion of the payment process.
Centralizing data, streamlining processes, and eliminating redundancies in employee roles and responsibilities contributes to a more stable AP process and less opportunity for fraudsters to enter into the equation.
Manual AP Leaves FIs Vulnerable to Fraud
Overburdened AP teams at small to mid-sized FIs are especially vulnerable to fraud. These professionals are stacked with daily responsibilities that bear directly on the bottom line, as well as the public image of the financial institution for which they work.
To a large extent, instances of fraud within FIs can be linked to the sheer amount of time required to manually process AP, and the workflow inefficiencies inherent in these outdated protocols. The lack of a centralized repository through which all payment processing can be completed safely and securely makes these teams susceptible to both avoidable mistakes and instances of fraud.
A recent study by Goldman Sachs reveals that AP professionals spend approximately 30% of their time on the job site collecting payment data and dealing with invoicing and payment questions. The same study shows that AP automation can save small to mid-sized FIs 70-80% in time over manual processing.
Automating AP to Reduce Fraud Doesn’t Have to be Difficult
Perhaps the primary benefit of AP automation is that it allows financial institutions to implement streamlined solutions with an easy-to-use, cloud-based interface that’s simple to integrate into your existing systems. The result is that banks and credit unions can begin to proactively fight check fraud, and other fraudulent activity that results from manual AP processing, starting today.
In addition to reducing fraud within the AP department, automation also saves money, eliminates back-office inefficiencies, streamlines compliance, and most importantly, allows you to leverage your most important assets – your employees — to spend their time on activities that contribute to the greater strategic objectives of your organization.
Contact us today to learn about how BankTEL is helping financial institutions of all sizes to fully automate their AP, with processes that are built for the strict operational compliance needs of forward-looking FIs.