This article by Joey Glazer, Director of AP automation at Quadient, underscores the need for UK businesses to adopt automation and AI to proactively combat APP fraud. While the new reimbursement policy aids victims, Glazer argues that preventing fraud at its source through automated AP systems is essential to protect consumers and businesses from severe financial losses and enhance overall financial security.
The Payment Systems Regulator’s new APP (Automated Push Payments) Fraud reimbursement policy is essential but is just solving one end of the problem. UK authorities and businesses should be doing more to cut off APP fraud at source. The policy ensures 99% of victims get their money and is billed as the strongest regulation in the world. However, rather than focusing all efforts on the clean-up operation, businesses should be using the power of automation and AI to prevent people from committing this fraud in the first place.
High on the agenda
APP fraud is a huge problem across the UK economy, costing £459.7 million in the last year. The impact of this criminal activity is massive – for consumers, the missing funds could prevent them from paying next month’s rent, and SMBs could be left with a shortage in funds. Although the money is likely to be reimbursed under the new policy, it will still take time to reach the victims. This means some people will still be failing to make deadlines to pay the rent and some businesses will still be late paying wages.
The amount refunded has been limited to £85,000, down from the previous cap, which was almost five times higher (£415,000). Although the PSR says 99% of claims it receives do not exceed £85,000, the small number of victims who lose more than this will be left permanently out of pocket. Whether it takes time to get the money back, or they never do, the knock-on impact of APP Fraud is potentially disastrous. It’s a particular problem for SMBs, which will have a more limited ability to absorb unexpected losses like fraud or bounce back from financial setbacks. To truly deal with the issue, we need a more comprehensive approach to tackling APP fraud.
Focusing efforts upstream
More emphasis needs to be placed on proactive detection, to cut off APP fraud at source. Even in smaller businesses, attempts to spot fraudulent activity can be like looking for a needle in a haystack. Accounts Payable (AP) systems are often manual and data-heavy, meaning it is hard to get good visibility over all transactions. Against this backdrop, if teams are stretched, they’re even less likely to spot the anomalies, so it’s easy to understand how mistakes and attacks can slip through the net.
This is where automation and AI can make a vital difference. AP systems can draw on the power of automation to cross-verify invoices against purchase orders and delivery receipts. This can automatically identify any discrepancies, flagging potentially fraudulent invoices that AP teams need to investigate.
Supply and procurement leaders say businesses that fail to use automation for invoice matching purposes are going to be ‘sitting ducks’ for criminals; those who fail to heed this warning could be left picking up the pieces. On the flip side, automated AP systems provide a great first line of defence against fraud. For instance, by automatically creating and tracking invoices, they can detect duplicate invoice requests, or instances of employees accidentally paying the same invoice twice.
Meanwhile, AP departments can also use AI to analyse vast sets of data, accurately identifying unusual payment patterns or anomalies in real time. These tasks would be extremely labour-intensive if done manually, but AI can perform them quickly and without needing to divert attention from other work. Just a few years ago, undertaking this kind of work would have led to team burn-out, but now AI can take the strain, meaning AP departments can go further than ever before to proactively identify fraud and head off the threat at source. In turn, team members can place their full focus on more complex issues.
Encouraging proactivity to drive change
By drawing on automation and AI, AP teams can play a part in stopping criminals in their tracks and dramatically reduce the threat they will fall victim to APP fraud, or lose money through other types of attacks, mistakes or human error. De-risking the finance department means businesses can move forward confident their finances are airtight, in turn retaining customer and investor confidence.
To really drive this change, the Government should be incentivising businesses to proactively identify instances of APP fraud. Now that we have had a change of power in Westminster, it could be time to consider a fresh approach to fighting financial crime. For instance, tax breaks could be used to encourage businesses to modernise finance systems to enable them to proactively monitor for fraud. While the reimbursement safeguard is a vital lifeline for victims, it’s time to get on the front foot to reduce the chances of APP fraud succeeding.