why fraud prevention is becoming an increasingly important subject for SMB's?

Businesses of all sizes depend on banks and with the financial landscape experiencing significant transformation in the wake of advancements in digital technologies, changes are occurring in these relationships as well. Digital transformation is paramount for both sides, affecting everything from business transactions to convenience. In the end, it all comes down to trust.

Where Digital Is Small and Slow 

Banks have, overall, been making significant investments in the development of their digital capabilities but there is, however, a marked difference in dedication between big banks and smaller, community banks. Research points to community banks having a much lower level of interest in digital transformation, which means they also invest less resources in the development and implementation of digital technologies. 

The Strain of the (Digital) Service: SMBs and Community Banks

This in turn affects businesses these banks work with, especially small and medium ones, who depend on them for their everyday operation. The relationship between community banks and SMBs is therefore suffering, with SMBs desiring the various benefits digital transformation can provide.

Fraud Comes for the Small Ones, Too

Fraud prevention is also very high on the list of services, therefore SMBs expect improvements from their banks and credit unions, and rightly so. Fraud doesn't just mean money lost for the SMBs: it can impede workflow or even completely stall your business; customers may lose trust in your business; and there is also the risk of legal liability.

Some of the biggest threats to SMBs in the past years have come from cyberfraud attacks where fraudsters were posing as revenue service executives, sending emails requesting employee personal tax information from a business' human resource and payroll departments.

This practice, known as "phishing", can cause severe data breaches and incur significant losses to a business. Phishing attempts occur at almost all levels and one of the gravest mistakes a small or medium business can commit is to believe themselves to be "too small to be interesting" to a phisher, while actually it is exactly this attitude that makes them highly attractive targets for fraudsters.

Never Overpay

Another fraud small and medium businesses are frequently subjected to is overpayment scams, where a client will approach them remotely to purchase their goods or services.

The client will then pay more than the sum that was originally agreed upon and later claim they've realized their mistake and request a refund. However, since the account that the client used was fraudulent, the business loses both the money and the goods or services they provided.

Suspicious Supplies

There is also the matter of office supplies: fraudsters pretending to be suppliers of stationery or other types of office supplies providers and offering a business either a free gift or a free sample of their merchandise.

This is done to acquire the contact information of an SMB employee and then use the information to fake an invoice the fraudsters will then send to the SMB, often receiving payment from the business before any suspicions arise.

But fraud can come even from those SMBs rely upon the most: banks themselves. One of the most notable cases of banks committing fraud against their customers is the scandal surrounding the Halifax Bank of Scotland which specifically targeted small businesses, imposing debt on them only to strip them of all assets once the businesses were unable to pay. 

The case of HBOS makes a significant point about the necessity of investigating every fraud claim: several businesses had complained about HBOS practices and there were suspicions that there was a clear and malicious intent involved, but it took the regulatory authorities a very long time to even consider these reports as meriting investigation.

SMB Security Essential

With online fraud on the rise as a result of the advent of digital transformation, banks have been making strides in developing and adopting new technologies and features to detect and prevent fraudulent behavior. And as the matter of HBOS shows, it is also vital that banks be subjected to the same scrutiny.

Machine learning and behavioral analytics are set to provide stronger, faster and reliable methods for detecting frauds in progress, while biometrics are expected to provide a way to stop fraudsters from making use of stolen devices or cards. All these developments will clearly be a boon to SMBs, ensuring greater security and unimpeded business.