How AP Automation Mitigates the Risk of Payment Fraud

If it feels like your organization’s risk of payment fraud is high, you’re not alone. According to the 2023 Association for Financial Professionals (AFP) Payments Fraud and Control Survey, 65% of organizations fell victim to fraudulent activity in 2022.

Fortunately, your organization isn’t powerless in preventing payment fraud. Automated accounts payable (AP) solutions can significantly reduce your risk of falling victim to common schemes. To understand how, let’s dive into what the payment fraud landscape looks like, the biggest vulnerabilities of traditional invoice processing, and specific ways in which AP automation technology improves fraud prevention.

The Payment Fraud Landscape

Payment fraud encompasses a range of deceptive practices aimed at unlawfully obtaining funds or sensitive financial information. Common tactics include:

• Invoice manipulation
• Identity theft
• Phishing scams
• Unauthorized access to payment systems

The consequences of falling victim to these schemes can be devastating. Organizations face damaged reputations, legal liabilities, and significant financial losses. In fact, one study revealed online payment fraud alone is expected to result in $343 billion worth of losses between 2022 and 2027.

To make matters worse, 44% of organizations that fell victim to payment fraud were unable to recover lost funds in 2022.

Manual Invoice Processing Vulnerabilities

If your organization currently maintains manual, paper-based AP processes, your chances of becoming a payment fraud victim – and experiencing major financial losses – are unnecessarily high.

Paper checks continue to be the payment method most vulnerable to fraud, and there’s no sign of this changing anytime soon. According to the Financial Crimes Enforcement Network (FinCEN), check fraud reports increased by 94% in 2022.

In 2023, the FinCEN issued an alert in response to an uptick in checks being stolen from the U.S. Mail. The alert states that mail theft-related check fraud has been on the rise since the COVID-19 pandemic, with perpetrators ranging from organized criminal groups to individuals to check washers.

And checks aren’t the only targets. Email is also a top source of payment fraud. In fact, the AFP found 71% of organizations fell victim to payment fraud via email in 2022.

Despite this, many AP teams that haven’t adopted invoice processing automation technology rely on email for invoice approval routing, supplier onboarding, and supplier bank account information management. When AP teams use email to complete these tasks, they’re unable to enforce separation of duties, assure chain of custody, track the actions taken on documents, provide stakeholders with visibility into invoice statuses, and prevent others from deleting documents ahead of retention schedules.

By relying on email for invoice processing, organizations are putting themselves at risk of multiple payment fraud schemes – from business email compromise scams to invoice phishing to vishing. Luckily, there is a way to avoid these schemes…

Strengthening Defenses through AP Automation

Accounts payable automation solutions help organizations mitigate the risk of payment fraud in several ways, including:

• Purchase order (PO) validation: Best-in-class AP automation solutions can determine invoice legitimacy by automatically matching invoices with corresponding PO lines and good receipts.
• Non-invoice verification: Invoice processing automation solutions can capture the date, invoice number, supplier name, and any other header and line-item details from invoices. This information can be used to detect duplicate invoices and check data against vendor master database records.
• Invoice review: Invoices that meet pre-defined conditions, such as high-dollar invoices or invoices from new suppliers, can be digitally routed for review based on pre-set rules – no need to leverage unsecure emails. AP departments can define the sequence of reviewers and the number of workflow steps. Workflows also enforce segregation of duties, including invoice approval.
• Payment review: The payment approval workflows built into leading invoice-to-pay solutions enable users to view invoices from the same supplier, access additional details on the invoice, leave comments for other approvers, and put payments into an exceptions queue. The result is a much more transparent process.
• Electronic supplier payments: Electronic payments cannot be easily intercepted like paper payments, making them less vulnerable to fraud. With digital payments, buyers and suppliers can easily see statuses and data can be encrypted. Some electronic payment solution providers even offer sophisticated enrollment services that verify bank account ownership and manage bank account data on an organization’s behalf. Plus, virtual card payments use tokens to avoid sending suppliers complete card numbers, further improving security.
• Anomaly detection: The artificial intelligence (AI) technology used in automated AP solutions can analyze historical data to spot anomalies, such as an invoice amount that is out of range.

Reduce Your Risk of Payment Fraud Today

Is your AP team currently utilizing manual processes that rely on paper and email-based tasks? Are you worried your organization is at high risk of payment fraud?

MetaSource can help you mitigate risk with accounts payable automation. We have over 30 years of intelligent document processing experience, maintain a dedicated team of invoice processing automation experts, and always make our clients’ data security a top priority. We undergo SOC 2 Type 2 audits and comply with HIPAA, PCI DSS, and GDPR guidelines. Contact us to learn more about our AP automation solutions and how they can help you prevent payment fraud.

If you’re not quite ready to contact our experts, feel free to check out our free guide to learn about other reasons AP teams are turning to automation.