The pandemic has driven Idaho’s small and medium-size businesses to expand their digital footprint. It’s been a much-needed lifeline for business owners looking to source customers, suppliers and growth opportunities. Unfortunately, our treasury management teams are seeing the downside of our customers’ more prominent online presence: an increase in payment fraud. Criminals have become skilled at tracking the additional data available on increasingly digital organizations and using it against them.
The worst part is that these fraudsters are intentionally taking advantage of the closeness of the Idaho business community. We’re not Los Angeles or Seattle — we have a larger percentage of small businesses here — and we rely on personal relationships and trust when we do business. It’s not uncommon for a company in this market to send an email to their friend down at the bank requesting a wire transfer. This makes Idaho businesses particularly vulnerable to payment or wire fraud since criminals will impersonate trusted business customers over digital channels like email. We now see some form of fraud from our clients in Treasure Valley every week, and we are addressing some very genuine-looking requests that turn out to be fraudulent.
What many smaller business owners don’t realize is that their bank can help address these challenges. There are simple treasury tools that provide a safer option for generating and sending wires online, with encryption and double-checks that greatly diminish the potential for fraud. Employing these and other fraud-prevention practices can not only protect small businesses from online criminals but also help business owners more efficiently manage cash flows and improve accounts payable/receivable processes.
Moving money securely
Effective cash management is critical for any size business. The right treasury partner can help analyze and forecast a business’s cash flows to make sure inflows and outflows align, reducing the risk of costly errors, as well as identifying opportunities to generate cost savings. For example, a business using ACH services might combine a line of credit with a zero-balance checking account to lower total interest payments.
Before the pandemic accelerated the adoption of electronic payment methods, many Idaho businesses were still manually issuing and depositing checks, using labor-intensive and nonsecure practices. For businesses that continue to receive paper checks, remote check depositing services lower the cost of payment processing and accelerate check clearing — which improves the availability of funds.
On the payment side, positive pay is an important back-end fraud prevention tool that has been well-received by local businesses of all sizes. With positive pay, the bank monitors and double-checks every transaction that comes through a business owner’s account. When a company issues a check through its accounting software, the details are exported to the positive pay system; then, when the check comes in for posting, the bank compares the details on the check to the details the business provided when it issued the check. Any discrepancies are flagged so the company can review them and approve or reject payment. It is a simple way to help prevent unauthorized payments and stop the most common types of check fraud. More importantly, it frees up business owners to focus on running their business, instead of constantly monitoring accounts for potentially fraudulent activity.
Other treasury services for efficient and secure payment include business credit cards, which offer zero liability for fraudulent transactions, and ACH payments with dual-control protocols (requiring sign-off by two individuals to confirm transactions).
As a community bank, First Interstate works primarily with small and medium-sized businesses, and we find that companies at the smaller end of the spectrum sometimes assume that certain services are available only to larger businesses. But there are no upper or lower limits on business size — treasury management services scale to meet the needs of any organization. In fact, a smaller business may need some of these services even more, since it is unlikely to have an accounting team, or even a dedicated bookkeeper, monitoring transactions all day.
Virtually every company in Treasure Valley that we have worked with over the years has been exposed to some form of attempted check fraud, wire fraud or email fraud (ACH fraud and credit card fraud are much less common, thanks to new security technologies). They have not all suffered loss, because we have been able in many cases to prevent or resolve the issue, but sooner or later everyone could feel the possible impact if the right safeguards are not put in place.
While treasury management solutions cannot eliminate the risk of fraud, they can mitigate the risk while supporting more efficient transactions and improved cash management — giving our partners greater peace of mind and more time to focus on their business.
— Ben Chaney is senior vice president and regional treasury manager at First Interstate Bank.