2016: The year of Fraud

When historians look back on 2016 I suspect it will be viewed as something of a watershed year. It will be remembered for the year of Brexit, the year of Trump, and for growing numbers of business owners, the year of fraud.

For many business owners, it’s not just the consequences of being left red faced and empty handed that makes fraud such an emotive issue, but the loss of customer confidence in its brand, damage to your reputation as well as the associated costs of paying punitive fines which can cause such a devastating impact.

Last year alone fraudsters cost the British economy more than £755m and this figure doesn’t even take into account the double whammy of lost goods as well as lost revenue. Whether we like it or not, fraud is an issue which every business owner must take seriously, after all, it can be seriously bad for your wealth!

So what can we expect to see in 2017 and perhaps more importantly what steps should your business take to protect itself?

1. Expect fraud losses to continue to increase
When it comes to fraud, there are many different techniques which are embraced by scammers to deprive your business from its hard earned cash. From the relatively innocent looking spam email packed with malware to elaborate telephone and web scams. According to Financial Fraud Action UK, the financial services industry watchdog, cases of fraud increased dramatically during the first half of 2016. Data released by FFA showed a 25% rise in fraud cases, compared with the same period last year, costing the UK economy £399.5m in the first six months of 2016 alone.

Expect to see this figure increase again during 2017, as the attempts made by scammers to lay their hands on your money become increasingly more sophisticated.

2. Develop a clear policy when taking remote payments
The single largest area of growth in the fraud industry relates to remote payments: Transactions which are made via the telephone or online without the vendor physically seeing the card. Such transactions negate security measures such as chip and pin which would be needed when making a purchase face-to-face.

In 2015 just under a million Card Not Present (CNP) scams were reported by Financial Fraud Action UK. In the first six months of 2016, 787,188 attempts had been made by fraudsters: an increase of more than 50%.

CNP fraud can be particularly devastating for businesses who often find themselves facing the double whammy of lost sales and lost goods. There are checks which can be carried out before an order is granted to establish whether a sale is legitimate. It always pays to test your systems and sales processes regularly when handling CNP payments, to reduce the risk of fraudulent orders being placed.

3. Expect more businesses to hit the headlines for all the wrong reasons
Some of Britain’s best known companies hit the headlines in 2016 as a result of data breaches. Talk Talk was fined £400,000 by the Information Commissioner’s office for failing to keep customer details safe and they weren’t alone. Tesco Bank, accounting software giant Sage, phone company Three and even the National Lottery have all found themselves on the wrong side of the law when it comes to keeping customer data safe.

Perhaps what’s often not reported is that SME businesses, who often don’t have access to the sophisticated technology or security provisions commonly used by blue chip companies are often considered to be a soft target for the fraudsters.

Give careful thought to the security systems you use when holding customer data. It’s worth remembering that the law is changing when it comes to data protection. In 2018, tough new EU data laws will come into effect which will see hefty fines levied on companies who don’t take their data protection seriously.

4. Remember the weakest link… and protect it!
From relatively simple mistakes such as clicking on a dubious email to failing to protect customer data by scribbling down card details on a piece of paper and processing later, human error can often be the weakest link when it comes to protecting your business: It’s something every business owner should take seriously.

Putting safeguards in place when it comes to processing customer data not only helps to protect staff from making mistakes but it can help to reduce the possibility of errors in the first place.

When it comes to processing payments one of the most effective ways of protecting your business is to embrace technology which enables staff to process payments without accessing card payment details. For telephone payments, one approach which is increasingly being adopted are Dual Tone Multi-Frequency (DTMF) payment systems. They work by transferring the customer to a secure payment line, allowing them to input their card details using the keypad on their phone without disclosing them to the member of staff. In the past, such technology was often out of the reach of SME’s but as the system becomes more widely available, it’s something which will become increasingly accessible to smaller businesses: a win-win for everyone.

5. SME’s will gain similar protection to larger businesses
One of the greatest challenges when it comes to securing business data can be the costs associated with implementing the technology. Whilst I can’t think of a single responsible business owner who doesn’t take their duty to their customers seriously, the levels of protection commonly used by big businesses place many SMEs at a disadvantage.

Take the DTMF system discussed above: A typical system would require a six figure investment, hardly suitable for your average independent retailer who is supplementing their income through telephone and online orders, and definitely something which is well out reach of the vast majority of SMEs. That is, until now.

Earlier this year, Gala Technology unveiled SOTpay, a unique Secure Order Transfer payment system designed to eradicate fraudulent telephone orders. The system works by helping companies to access powerful systems. PCI DSS compliance for customer credit and debit card data is an added benefit when SOTpay is installed without the substantial set up costs typically associated with this type of platform.

If 2016 will be remembered as the year of Fraud, 2017 could well be remembered as being the year when businesses start fighting back. Losses as a result of telephone fraud have remained stubbornly consistent in recent years, but with the advent of new systems such as SOTpay leading the fight against telephone fraud, the battle lines have been drawn.