VCNs Help B2B Payments Professionals Address Fraud Risks

Forrester predicts online B2B sales are going to top $1 trillion US dollars by 2020. With so much financial activity whirling around cyberspace, fraudsters are busy honing their digital thievery skills. They’re expected to demonstrate increased mastery and cheat unsuspecting business buyers and suppliers out of more and more money as time wears on; unless, of course, payments professionals take effective fraud prevention and detection measures to reduce their risks.

Let’s examine what companies are doing to combat cybercrime and how virtual card numbers (VCNs) can fit into the payments mix to reduce digital payments fraud.

Preparing for Cyber Attack

It’s helpful to look at cybercrime from a high-level perspective in order to gauge companies’ readiness to involve their payments function in loss prevention. Half (50%) of the organizations represented in EY’s 19th Global Information Security Survey 2016-17 are confident in their ability to predict and detect a sophisticated cyber attack. Still, 86% say their cybersecurity function does not fully meet their organization’s needs. The consultancy recommends organizations start by determining how much risk they can handle and then establish these three lines of defense:

• Executing control measures in the day-to-day operations
• Deploying monitoring functions such as internal controls, the legal department, risk management, and cybersecurity
• Using a strong internal audit department

Narrowing down to payments-related cybercrime, which can involve wire fraud, check fraud, and—of course—credit card fraud, it’s clear that the finance and accounting areas can participate in establishing these defenses. Theft of sensitive data is among the Top 5 Cybercrimes, according to the American Institute of CPAs, and much of this information (e.g. credit card numbers and bank account details) “lives” in these areas.

Read Five Types of Fraud Cutting into a Merchant’s Bottom Line for related insights.

Beating Card Not Present Fraud

Considering the wide world of credit card fraud, EMV technology is making it more difficult for criminals to hack physical chip-and-pin cards—and that’s changing fraudsters’ approach. According to Gartner thought leadership presented in The Paypers’ Web Fraud Prevention and Online Authentication Market Guide 2016/2017, criminals will increasingly look at online and call centers as the preferred method of attack.

As a result, businesses operating in eCommerce need to raise their antennae to card not present (CNP) fraud, losses for which Aite Group predicts will reach $6.4 billion by 2018. And more than 50 percent of respondents of the 2016 AFP Payments Fraud and Control Survey foresee transactions in which cards are not present will be exposed to greater fraud activity.

Since CNP fraud involves theft or otherwise unauthorized use of stored credit card numbers, single-use virtual card numbers (VCNs) are an attractive alternative method for making digital B2B payments—for ecommerce or standard supplier transactions. They offer:

• Single-use numbers – Each transaction has its own PCI-compliant 16-digit number designated for a specific purpose, and with a specific vendor.

• Virtual protection – By design, VCNs aren’t associated a physical card that can get lost, stolen, or copied.

• Minimal data compromise – Use of VCNs eliminates the need for buyers and sellers to exchange (or maintain) banking or plastic credit card information. For CNP transactions, this minimizes the contact that a merchant can have with cardholder data.

The Power of Automated Reconciliations

Finally, Swift’s information paper, Mitigating Fraud Risk Through Strengthened Payment Operations, says a “robust reconciliation process,” which includes regularly checking payment confirmations and end of day statements, is part of a successful fraud management strategy. This gets to the heart of what makes VCNs so valuable to the payments process: administration and reconciliation. CNP transactions can be inherently difficult to track, slowing down the detection of fraudulent use. And the manual nature of traditional reconciliations tends to slow the process further. VCNs enable automatic transaction matching—and that means a faster, more secure reconciliation process.

Take a closer look at VCNs’ role in fraud protection in Virtual Card Numbers Fight Payments Fraud in Business Travel.

And for more information about VCNs’ impact on budgets, read How Using Virtual Card Numbers Reduces the Costs of Doing Business.