Written by Kady Potter
Posted on 15/07/2014

With fraud costing UK SMEs billions, how are you fighting back?

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It’s claimed that payment fraud is costing each UK small business over £4,500 per year on average in lost revenues and the costs of managing fraudulent activity. The Federation of Small Businesses puts the number of SMEs in the UK at 4.9 million, and Action Fraud suggests that one in four of those are affected by fraud each year. The research from Sage Pay outlines the total annual losses as having reached a worrying £22 billion over the last 12 months.

Incremental losses could quickly add up to financial trouble

Three per cent of those surveyed admitted that their business has lost over £10,000 to fraud within the past year. The number having lost between £5,001 and £10,000 was not far behind at four per cent. A substantially higher amount of companies have seen smaller yet no less troubling losses, with 17 per cent claiming to have lost up to £1,000 to fraud.
A few pounds here and there may not be the end of a business, yet over time these losses could add up to a more severe deficit.

Card fraud also impacts the customer

Failing to put necessary measures in place to safeguard customer information can further harm the reputation of your business if consumers are victims of fraud. Cyber criminals are increasingly choosing to target databases and access personal information – make sure this is encrypted, tokenised and stored on a secure platform.

How to fight commercial fraud

Sage Pay’s research of more than 1,000 business decision makers in the UK showed that 39 per cent do not spend any money at all on fraud prevention. That figure desperately needs to be reduced, especially as losses through fraud continue to rise.

A further 21 per cent did not know which preventative tools, if any, they had in place or at their disposal. There are steps every business can take to start fortifying their defences:

  • Keep an eye on the time of day that an online transaction is made. Some customers do make purchases late at night, but this may also indicate a buyer in a different time zone.
  • Use geo-location services to identify the transaction’s origin and whether this is a ‘high risk’ country in terms of commercial fraud.
  • Have caution when processing transactions for an unusually high value or volume of product.
  • Ensure that the delivery address provided by the customer is valid. PO boxes, for example, should be viewed with a greater degree of caution and double checked.
  • Use customer data to build profiles that make genuine transactions simpler to recognise.
  • Check your compliance with the Payment Card Industry Data Security Standard (PCI DSS). This is a legal requirement for all merchants accepting card payments – but 42 per cent of companies surveyed did not know if they were compliant or not.
  • Is there a positive side to fraud?

  As part of their own conclusions, Sage Pay unusually makes the assertion that low amounts of fraud could actually be good for business. This claim is made on the basis that, if SMEs never encounter any fraud at all they will never know how to deal with it effectively. 

In addition, companies that void and refuse transactions immediately on even the slightest suspicion of commercial fraud may be inadvertently turning away genuine customers. Placing more security protection and data input fields into the purchase process could also put potential consumers off.


Do you want to know more about various different methods that fraudsters use to pass into the heart of an organisation and how to protect your business against this growing issue? Go directly to our download center and download the eBook for free!

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