Treasury Today Country Profiles in association with Citi

Fraud and Brexit driving UK payments industry agenda

Toy models positioned as crime investigators looking at the missing star in the EU flag

Data from Bottomline Technologies shows an increasing concern about internal fraud and the impact on businesses post-Brexit.

Brexit, increasing rates of fraud, late/delayed payments and PSD2/Open Banking are the big payment trends shaping the thoughts of financial decision makers.

This is according to Bottomline Technologies’ latest ‘UK Business Payments Barometer’ survey, which quizzed 400 UK companies on what is top of mind right now.

Brexit uncertainty

Brexit was cited as the biggest concern for companies in the survey, largely because the scope of the exit deal and the impact it will have on businesses remains unknown.

For example, will UK businesses be required to alter payment terms with customers and suppliers in Europe? Also, will businesses need to open a bank account in the EU to use SEPA?

“These are all questions that businesses want answering, and soon, so they can begin making plans,” says Ed Adshead-Grant, General Manager, Payments at Bottomline Technologies.

Fears of fraud

It won’t come as a surprise to hear that the fear of payment fraud is also top of mind for corporates. Indeed, 60% noted that external cyber fraud was a concern, a slight increase from last year.

Anxiety is also growing around internal payment fraud. This was cited by 35% as being a concern – a 169% increase from the first study conducted by Bottomline in 2016.

Despite these fears, instances of fraud amongst UK companies decreased in the past year. Just under half said that their organisations had not been a victim of fraud, 15% said they had been and 41% were unsure.

Financial losses incurred by companies that fell victim of fraud ranged from less than £10,000 to upwards of £1m — the majority said between £10,000 and £50,000 was stolen. What is worrying, however, is that two-thirds of companies were unable to recover more than half of stolen funds.

“The fraud landscape is evolving,” says Adshead-Grant. “Whilst instances of fraud appear to have decreased on last year, fraudsters are becoming more targeted and causing greater damage when they are successful. Companies will need to continue working on using technology and putting in place policies and procedures to mitigate the risk.”

Poor payment culture

Late payments in the UK are endemic, this is despite regulation to put pressure on late-payers. Disputes over service quality are the number one reason that businesses pay late, according to Bottomline’s survey. This is followed by businesses sending incorrect invoice details, which Adshead-Grant says is a “common, but weak excuse”.

What is interesting to note, however, is that 38% of businesses admitted to paying late in order to protect their own liquidity. Twenty-six percent said they paid late because suppliers didn’t chase.

“Both these statistics highlight that late payment is a cultural and behavioural issue because the technology is there to ensure payments are made on time,” says Adshead-Grant. “But it is an area where business will have to change because everything is more transparent in today’s data-driven economy. Paying late will, therefore, become a reputations issue and potentially damage the company’s bottom line.”

Open futures

Over the next 12 months, Adshead-Grant expects that Open Banking and PSD2 will rise up the agenda for UK business as more solutions hit the market. “This is the first time in the history of financial services that banks have been forced to put their data in the public domain; it is a game changer,” says Adshead-Grant.

“This is also why we have seen slow progress since the go-live date in January this year. But, I expect that over the coming months businesses will be able to leverage more innovative solutions, that are cheaper and designed to fit the requirements of the digital age that we live in.”

Adshead-Grant’s advice to businesses is clear: “Understand what Open Banking means, embrace what is to come and capture the benefits of this game-changing regulation.”