Manual Payments, Maximum Risk: How AP/AR Automation Beefs Up Security

Old-school manual B2B payments, particularly checks, are sitting ducks for fraudsters.

Many organizations, particularly those in industries with long-established practices or fragmented environments, like construction, healthcare and beyond, continue to manage payments using outdated methods such as paper checks, manual invoicing and batch payments.

And these 20th century methods don’t just introduce inefficiencies — they also create significant security vulnerabilities.

Paper checks, for instance, can be stolen, forged or altered, while email-based invoicing can be susceptible to phishing and business email compromise (BEC) schemes. At the same time, legacy payment methods provide little visibility into real-time payment status, making it difficult for businesses to detect irregularities or address potential fraud as it occurs.

Today’s fraudsters are increasingly sophisticated, capable of deploying complex and multifaceted attacks. The pressure is increasingly on B2B payments, with their attractively large transaction volumes, to keep up in turn.

The first step for many firms is moving beyond transactional processes dependent upon manual invoicing, paper checks and even basic ACH transfers.

See also: Unlocking the 3 Biggest Benefits of Automating Accounts Payable

The Problem With Outdated B2B Payments

Outdated systems may offer fertile ground for fraud, but transitioning from manual and outdated systems to automated payment processes can provide firms with significant security advantages.

“If I’m manually handling payment information … it’s risk, long story short,” Ernest Rolfson, CEO and founder at Finexio, told PYMNTS, noting that as businesses grow and transaction volumes increase, the risk becomes more pronounced, especially when staffing levels remain static or are limited.

PYMNTS Intelligence has found many executives report being forced to shut the door on new customers because of a lack of proper controls to weed out the fraudsters, limiting the ability of businesses to scale. Invoice fraud is a growing threat, with cybercriminals and internal fraudsters finding ways to manipulate the payment process for illicit gain.

That’s in part why one of the most significant advantages of automating B2B payments is the ability to integrate advanced fraud detection tools into payment workflows. Automated systems can flag suspicious activity, monitor transactions in real time, and detect anomalies that human operators might overlook. With machine learning and artificial intelligence (AI) tools increasingly embedded in modern payment systems, businesses can spot red flags early and take immediate action to prevent fraud.

After all, manually managing sensitive information such as bank accounts or supplier changes exposes companies to fraud — and today’s fraudsters are constantly waiting in the wings to take advantage of any vulnerability.

“Paper checks are inherently and ironically very risky vehicles,” Ben Weiner, senior vice president and global head of B2B payments at Nuvei, told PYMNTS in November. “It’s about converting those types of payments into more secure forms like virtual cards while limiting the risk of manual error or fraud every time a payment is touched by a human.”

Read more: Making Sense of Why Some Firms Stay Stapled to Paper Processes

Why Prioritizing Payment Security Matters

While automation of accounts payable (AP) and accounts receivable (AR) can lock fraudsters out while speeding up clunky B2B processes, Eric Frankovic, general manager of business payments at WEX, told PYMNTS that his firm’s fraud team has categorized four main types of fraud that businesses encounter in the payment space.

They are: merchant fraud, or fraudulent invoices and payments issued by fake or dishonest merchants; bank identification number (BIN) attacks, where bad actors test many card numbers to identify valid ones that can be exploited; compromised card fraud, which includes both physical theft of cards and the theft of virtual card numbers, often via merchant manipulation; and customer and employee misuse, or fraud that occurs from within the organization, where employees or customers take advantage of the payment system.

“Fraud is growing as fast, or faster, than the pace that the overall B2B market is growing, so we have to fight hard to implement tools and stay ahead of it,” Frankovic said.

PYMNTS Intelligence finds that the question isn’t whether to automate, but how quickly firms can make the transition to remain competitive in an increasingly digital business environment.

Still, not all automated payment systems are created equal. Businesses should prioritize platforms that offer robust encryption, multi-factor authentication and real-time fraud detection. And as with any system upgrade, human error remains a risk. Employees should be trained on the use of automated payment systems and informed about security best practices to minimize the risk of insider threats or accidental breaches.

But ultimately, the benefits of moving B2B payments from outdated manual processes to automated systems extend far beyond speed and efficiency. The security advantages alone are enough to justify this transition, as they help to protect businesses from the growing risks of fraud, cyberattacks and regulatory non-compliance.