The FBI’s latest update on business-to-business (B2B) payment fraud reported that more than 24,000 businesses fell victim to a business email compromise (BEC), otherwise known as scams, with total losses of over $2 billion. What’s more, increasingly sophisticated cyberattacks use social hacking to send faked bank account changes.
If bank verifications take weeks, that’s a major opportunity for bad actors and big risk for unprepared companies. The good news is that companies are fighting back with blockchain. In this video interview at SAP TechEd, I watched a demo of how blockchain provides buyers and suppliers with an additional layer of security and data integrity.
“Blockchain brings trust to B2B payment processes like creating, updating, and exchanging supplier bank account information,” said Torsten Zube, head of Blockchain for the SAP Innovation Center Network. “Finance may be under pressure to meet discount deadlines. Outside verification agencies increase potential risk exposure. Fraud can even happen from inside the company. Embedding blockchain into payment process gives employees fast and accurate data sources.”
Here’s how it works. Suppliers enter their banking information directly onto the chain, which automatically distributes updates to all the designated organizations that purchase goods and services from them. This saves both suppliers and buyers time, while eliminating manual, error-prone processes such as multiple phone calls to update information in multiple companies and systems.
Blockchain Prevents Fraud Before It Happens
One of the biggest benefits of using blockchain to verify B2B payment process data is proactive fraud prevention. That’s because everyone — suppliers and buyers — has a single source of truth that isn’t controlled or owned by any one entity. It doesn’t eliminate outside verification agencies, but rather changes the focus of internal finance teams.
“Infusing blockchain capabilities into an SAP customer’s payment run processes on SAP S/4HANA Cloud will give companies highly secure supplier master data like bank account information,” said Zube. “Attacks will become immediately visible, allowing companies to shift security from detection to prevention. This brings groundbreaking trust to many industries.”
Eliminating Payment Fraud
This pilot isn’t about automating paper-based processes. The idea is to re-imagine how companies manage supplier updates and by extension, invoicing and payments. Zube said companies are highly motivated to use blockchain for both security and convenience reasons.
“All participants can maintain a certain level of privacy over their bank account information and partnerships,” he said. “At the same time, everyone on the network can easily verify payment data.”
He added that blockchain delivers equally important value by supporting shared know your customer (KYC) processes. Once verified on the immutable distributed ledger, supplier bank account information doesn’t have to be verified again by others on the trusted chain.
The Way Forward: Use Case-Driven Conversations
One of the most overlooked yet critical things missing from many blockchain conversations is how companies will connect all the information in the chain to current processes.
“The last mile is so much longer than just a mile,” said Zube. “In the network-based business model, organizations need to begin blockchain discussions with their specific use cases, and how they’ll share data from the chain across systems within and outside the company. Link blockchain-enabled data to real world business processes.”
Greater Security Can’t Come Soon Enough
Meantime, the international threat of payment fraud keeps growing, with a 136 percent increase in global losses over the past two years. It’s no surprise that IDC predicted cross-border payment networks using blockchain will transmit over $60 billion by 2023. Move over fraudsters — blockchain is all over you.
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