Middle-market firms face rising fraud risks in the procure-to-pay cycle. PYMNTS Intelligence data shows automation offers the most effective defense, yet just 28% of firms have adopted automated fraud detection systems at this time. Many firms continue to rely on manual measures like staff training, which aren’t as effective. Firms operating under high uncertainty report even greater challenges, with 87% citing significant customer losses because of fraud.
These conditions force firms to prioritize short-term fixes over long-term investments, limiting growth and innovation. Automation, which 71% of respondents identified as the most impactful solution, remains significantly underused. Firms that adopt automated fraud detection systems report improved outcomes, streamlined processes and reduced financial strain. Tools integrating automation with spending visibility and control are particularly effective at addressing fraud vulnerabilities.
Dynamic, real-time solutions play a critical role in preventing payment processing issues. Features like real-time tracking, payment validation and automated blacklists help firms address risks before they escalate. These technologies enable firms to balance fraud reduction with operational efficiency, offering scalable approaches to navigate uncertainty.
In short, middle-market firms need to rethink their approach to fraud prevention. Leveraging automation will allow them to build resilience and reduce operational risks.
These are some of the findings from this edition of PYMNTS Intelligence’s Certainty Project, a collaboration with Coupa. Drawing on insights from 60 heads of payments surveyed between Dec. 4, 2024, and Dec. 12, 2024, this report explores how firms navigate fraud risks and operational uncertainty while seeking scalable solutions.
Fraud Prevention Automation Beats Manual Methods
Automated procurement fraud detection systems double the likelihood of reducing fraud compared to staff training.
Automated procurement fraud detection significantly outperforms traditional methods. Yet, it remains underutilized among U.S. middle-market firms. Just 28% of firms have adopted automated fraud detection systems, compared to 50% that rely on staff training programs. Automation proves far more effective, with 71% of respondents citing it as the most impactful strategy for reducing fraud. In contrast, 27% of firms say the same of staff training.
The most common strategies include traditional measures, such as stricter internal controls, cited by 53%, and training and awareness programs, cited by 50%. These approaches likely persist due to their lower upfront costs and broader accessibility. However, they yield less substantial results than automation. For example, just 28% of firms report the biggest bang for their buck from the benefits of strengthening procurement ethics policies. Just 37% report that their biggest benefit comes from conducting regular audits or risk assessments.
PYMNTS Intelligence data shows automation is superior at reducing fraud to training staff. Automation enhances fraud prevention in other ways, such as streamlining vendor screening, improving due diligence and reducing human error. It is essential for modern fraud mitigation toolboxes.
Middle-market firms that adopt automated systems position themselves to reduce fraud effectively while reallocating resources from manual processes to higher-value activities. This trend highlights automation as a critical solution for procurement fraud challenges.
Fraud Costs and Customer Losses Are Worse With High Uncertainty
The costs of procurement fraud are higher among high-uncertainty firms, highlighting the need for fraud prevention automation.
Procurement fraud creates significant financial and operational strain, particularly for firms operating in high levels of uncertainty. Eighty-seven percent of high uncertainty firms report very or extremely significant customer losses. In contrast, 67% of middle-market firms overall say the same. In other words, the losses among high-uncertainty firms are 30% higher than average.
Fraud mitigation costs also affect 87% of firms overall, while direct procurement fraud losses impact 82%, forcing budget allocations to focus on short-term fixes. These financial pressures are compounded by spillover effects such as inaccurate forecasting, cited by 75%, and loss of customers, cited by 67%. The combination harms firms’ ability to navigate uncertainty.
Customer loss due to procurement fraud is a key challenge for firms with high operational uncertainty. These firms are significantly more likely to report very or extremely substantial impacts compared to peers in lower uncertainty environments. The costs of avoiding procurement fraud can also complicate budgeting decisions, strain operational resources and limit investments in growth initiatives.
Despite substantial investment in fraud mitigation, firms operating with high uncertainty report an outsized impact from procurement fraud. While 93% of high-uncertainty firms struggle with fraud mitigation costs, 76% of low-uncertainty firms report the same burden. Similarly, customer losses are far more common among high-uncertainty firms, at 87%, than their low-uncertainty counterparts, at 62%. These disparities suggest that uncertainty amplifies fraud-related costs, making prevention more urgent for vulnerable firms. Strengthening fraud prevention systems, particularly in high-uncertainty environments, is critical to reducing financial strain and restoring operational stability.
High-Uncertainty Firms Struggle More With Fraud and Payment Issues
Among middle-market firms, 22% identify third-party fraud as their top threat.
Firms operating under high uncertainty face greater challenges in the procure-to-pay cycle, particularly with third-party fraud and payment processing issues. In fact, 22% of firms cite third-party fraud as having the biggest negative impact, and another 16% say it has some negative impact. Third-party fraud plays a role in supply chain disruptions and inefficiencies. Fraudulent activities committed by external entities erode trust, delay operations and create financial and reputational damage.
Eighteen percent of firms report payment processing issues as their top challenge. High-uncertainty businesses were twice as likely as low-uncertainty peers to report these issues. Such problems complicate payments to suppliers for goods and services, adding to operational strain and further magnifying uncertainty.
Errors are a pervasive issue: 22% of firms identify internal errors as their biggest challenge. These inaccuracies complicate the procure-to-pay process and introduce inefficiencies, impacting financial operations and vendor relationships. Supplier-side errors also create hurdles, with 18% of firms noting significant negative impacts from these issues.
Third-party fraud and payment processing issues disproportionately affect technology and services sectors, which rely heavily on seamless supply chains and financial operations. In contrast, sectors focused on goods report higher impacts from supplier fraud and deficiencies. This reflects their reliance on physical procurement processes.
High-uncertainty firms face compounded risks as errors and inefficiencies heighten their operational challenges. Combating these challenges requires stronger controls and automated systems to mitigate disruptions.
Clerical Errors Call for Fraud Prevention Automation
Clerical errors and duplicate payments dominate payment processing woes, driving demand for real-time tracking and validation solutions.
The most common payment processing issue is clerical errors, impacting 45% of firms in the past year. This rises to 53% of high-uncertainty firms, highlighting their greater vulnerability to manual errors. Duplicate payments are the second-most reported issue among high-uncertainty firms, affecting 22%. This rate nearly doubles to 40% of high-uncertainty firms.
Transaction limits, payment rejections and system outages further compound these challenges. These issues introduce inefficiencies and financial strain. Adopting smarter tools can address these pain points.
Likewise, some executives are pushing for advanced fraud prevention systems equipped with features like real-time payment tracking and validation. Automated blacklists, two-factor authentication and discrepancy detection are among the most requested capabilities. This reflects middle-market firms’ critical need for proactive fraud management.
Real-time tracking systems can help mitigate clerical errors by validating payment details before execution, while automation minimizes the risk of duplicate payments. These tools are particularly valuable in high-uncertainty environments, where errors and inconsistencies amplify operational challenges.
Firms experiencing high uncertainty are disproportionately affected by payment processing issues. Chief among these are clerical errors, with 13% reporting this as the greatest issue and another 32% citing this issue overall. Transaction limit problems are also more prevalent among high-uncertainty firms. Deploying robust automation can enhance process reliability and reduce human error.
Error detection and elimination dominate payment processes. The adoption of smarter, automated tools is becoming an operational imperative for firms striving to reduce fraud and inefficiencies.
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Methodology
This edition of the 2025 Certainty Project, “Fraud in the Procure-to-Pay Cycle Can Hit Middle-Market Firms Hard — Fraud Prevention Automation Can Give an Edge,” is a PYMNTS Intelligence and Coupa collaboration. It is based on a survey conducted from Dec. 4, 2024, and Dec. 12, 2024. It examines how cybersecurity risks and operational uncertainty intersect, shaping financial and operational strategies for middle-market firms. The survey included 60 heads of payments from middle-market firms generating annual revenues between $100 million and $1 billion. It provides insights into their challenges, mitigation strategies and outlooks for managing procurement fraud and evolving cybersecurity threats. It explores the role of automation and other innovative approaches in addressing fraud and improving operational efficiency.
