What To Do Next
As Small Business Week comes to a close, the focus shifts from navigating challenges to building what comes next. The right financial tools—and the right partners—can do more than help you manage day-to-day operations. They can position your business for growth while helping you protect it from emerging risks.
As digital payment threats become more sophisticated, small and midsized businesses (SMBs) are facing an invisible yet ever-present battle against fraud that finance leaders must strategically and continuously navigate. Fraud is a constant threat, with fraudsters continually adapting their tactics to exploit emerging vulnerabilities as businesses reinforce their defenses and new technologies emerge.
Nearly all businesses (92%) are worried about fraud, with 56% seeing more attempts in the past year alone, according to a recent BILL survey. Though the majority of businesses acknowledge that fraud is on the rise and a growing concern, many still don’t feel confident in their protection from fraud—a gap that requires immediate attention.
This gap in confidence underscores an ongoing need for SMB finance leaders to adopt a strategic, long-term approach to fraud prevention. Because fraudsters operate like professional criminals, businesses must counter with equally sophisticated strategies—ones that go beyond reactive measures to proactively identify ever-evolving fraud tactics, recognize vulnerabilities, and strengthen financial controls. By leveraging the right technology and trusted partners with deep expertise, SMBs can effectively mitigate risks and stay ahead of the threat.
AI’s Role in Both Powering and Preventing Fraud
Payment fraud remains a persistent and evolving threat, with criminals continuously adapting and refining their approach to exploit weaknesses in digital transactions to execute unauthorized payments, fraudulent chargebacks, and synthetic identity scams. Financial crime has evolved from simple theft to sophisticated fraud schemes that directly threaten a business’s financial health and stability.
This transformation has been accelerated by the rise and accessibility of AI and other advanced technologies, which have not only equipped fraudsters with powerful tools but also made cybercrime easier to commit. Ready-made hacking kits and automation have lowered the barrier to entry, allowing even individuals with minimal technical expertise to execute complex financial schemes once reserved for skilled and experienced criminals.
AI has specifically introduced a new component of payment fraud. The FBI’s warnings about AI-related financial fraud highlight how criminals are leveraging generative AI to create credible phishing emails, deepfakes, malicious code, and counterfeit documents, allowing fraudsters to operate more efficiently and on a larger scale.
However, AI isn’t just a tool for criminals—it’s also a critical weapon to help combat fraud. While bad actors exploit AI to advance their schemes, the same technology is being leveraged to fight back and keep bad actors at bay. By leveraging AI-driven fraud detection and real-time transaction monitoring through digital payment systems, businesses can stay ahead of these evolving threats.
SMBs Face Large Cybersecurity Readiness Challenges
As contactless payments continue to grow, regulatory efforts—such as the proposal from the Consumer Financial Protection Bureau to expand the Electronic Fund Transfer Act—aim to strengthen consumer protections in digital payments. However, finance leaders can’t afford to wait for regulations to catch up. The impact of payment fraud can be devastating, leading to serious financial losses and damaged trust among employees and patrons. SMBs are often disproportionately impacted by these threats, since, unlike their larger counterparts, they typically have fewer resources and operate on smaller margins, making it more difficult to absorb unexpected losses.
Many SMBs mistakenly believe they’re safe from payment fraud because they’ve never experienced it or because they assume fraudsters only target larger enterprises. This risky mindset ignores the reality that fraudsters specifically target businesses that may lack the resources to detect and prevent fraudulent transactions. Data from BILL found that 46% of business leaders view AI as raising the overall risk of fraud, while 54% view AI as a fraud protector by detecting it.
Nearly half of SMBs lack strong transaction verification processes, making it easier for fraudsters to manipulate payment systems. AI is only accelerating the risk, with 81% of SMBs acknowledging that AI increases their security needs. But SMBs operate with significant disadvantages, often lacking dedicated IT security staff and struggling to keep up with evolving threats while managing day-to-day operations. While implementing fraud prevention tools may seem costly, the price of inaction—lost revenue, legal battles, and eroded customer trust—can be far greater.
How Finance Leaders Can Set Up Guardrails
Small and midsize businesses don’t need to make massive investments to protect themselves from payment fraud. By leaning on trusted partners and embracing technology, they can gain access to advanced solutions designed to meet their unique risk-mitigation needs—ensuring stronger defenses and reduced exposure to fraud.
However, many businesses still rely on outdated paper-based processes, introducing unnecessary risks and inefficiencies. By addressing and updating these manual systems, SMBs can take advantage of accessible digital payment solutions and protocols to protect themselves at a relatively low cost. Digital payments not only provide a secure, streamlined way to handle transactions but also help maintain comprehensive records, making it easier to track and identify potential issues in real-time.
Another effective way to mitigate risk is by implementing automation in accounts payable workflows. Automating the process can drastically reduce the chances of stolen checks or altered transactions, all while maintaining organized, detailed records of payments. This automation minimizes human error and provides transparency, helping businesses monitor and respond to any discrepancies promptly.
Additionally, implementing multi-factor authentication (MFA) on payment platforms adds an extra layer of security against unauthorized access. Requiring multiple forms of verification—such as a password combined with a one-time code sent to a mobile device—can significantly reduce the risk of fraudsters gaining control over payment approvals and transactions. By shifting away from paper-based processes, businesses can strengthen their security posture, significantly reduce their exposure to fraud, and embrace a safer, more modern approach to managing finances.
Finally, by creating a fraud-aware culture and implementing basic financial controls and protocols, finance leaders can further reduce their company’s exposure to this growing threat. Educating employees on how to recognize fraudulent transactions and encouraging vigilance can drastically enhance fraud prevention efforts. Simple steps, such as using trusted payment platforms and consistently monitoring accounts, can make a big difference in minimizing fraud risks.
Fighting Fraud for Long-Term Success
While combating payment fraud may seem like a daunting challenge, there is hope. The future of SMB protection lies in understanding the nature of payment fraud, taking proactive action, and adapting to new threats. These businesses don’t need to spend a fortune to protect themselves; basic steps like embracing digital platforms, leaning on trusted partners, and educating employees can drastically reduce the risk of payment fraud.
As the backbone of our economy, SMBs can’t afford to remain vulnerable to fraudsters. By fostering a culture that prioritizes fraud prevention and implementing simple yet effective payment security measures, finance leaders at small and midsize businesses can safeguard both financial stability and customer trust, ensuring long-term success.
Mary Kay Bowman oversees the payments and financial services business at BILL. She has over 20 years of experience in global payments strategy, product development, and operations. Throughout her career, she has worked at the intersection of commerce and financial services, including online, cloud, and mobile commerce.
Photo courtesy Getty Images for Unsplash+
