Redefining Risk: Why SMEs are embracing cutting-edge fraud prevention


SMEs aren’t immune to the threat of fraud – in fact, they often face equal, if not greater, risks due to tighter budgets and limited resources. It’s vital for these businesses to invest time and money in fraud prevention, as any financial instability could spell the end of their entrepreneurial journey.

According to PWC, a whopping 51% of businesses worldwide have experienced fraud in the last two years, marking the highest level in the past two decades. The rapid pace of digital transformation has opened up new possibilities for SMEs to expand globally, breaking geographical barriers. However, this connected way of working has also made them more susceptible to fraudsters who leverage technological advancements and evolving consumer behaviours.

What’s concerning is that, despite the very real threat of fraud, 48% of small businesses believe they’re not significant enough to attract the attention of fraudsters. Some might think that if they haven’t fallen victim to fraud yet, it’s not a pressing concern. However, without proper precautions, businesses could unknowingly become attractive targets for sophisticated cybercriminals.

In the next five years, SMEs might face losses of up to $130 billion due to payment fraud. The impact of fraud goes beyond just financial losses, disrupting workflows, impeding business development, eroding customer trust, and even exposing the business to legal liability.

When adopting fraud prevention solutions, it’s essential for SMEs to choose the right approach. Sometimes, businesses may venture down a path that isn’t a priority for them now, so it’s crucial to align prevention measures with their specific needs.

These are the most popular anti-fraud solutions South African SMEs are adopting right now:

  • Machine learning and AI fraud tools: Detecting patterns of fraudulent behaviour in real-time, even in smaller datasets.
  • KYC solutions – Investing in a Know-Your-Customer solution is crucial for South African businesses, focusing on key onboarding and affordability aspects in today’s digital age, where seamless and automated verification is essential. Here are some KYC requirements gaining traction among SMEs:
    • CIPC checks: if your customers are businesses, a KYC solution can help you verify the legal status of a business through checks with CIPC.
    • Bank statement fraud checks: Conduct thorough scrutiny of PDF uploads of bank statements to detect potential signs of fraud.
    • Credit risk assessment: evaluate the financial health of a customer through bank statements and credit reports.
  • Secure payment gateway services: choosing a reputable payment gateway provider that offers encryption and tokenization to protect financial information during online transactions is essential. Payfast, Peach Payments, Ozow and Yoco are some of the top contenders in SA, offering secure and affordable payment gateway services.
  • Anti-phishing software: implementing software to identify and block phishing attempts, including email filtering, link analysis, and real-time threat intelligence is a no-brainer for any SME in South Africa. Mimecast, Phishield and SensePost are a few of the software tools that can help you on your way.

Effective fraud prevention results in fewer payment problems, facilitating smoother transactions. Improved cash flow allows efficient resource allocation, unburdened by disputes. Stability becomes a hallmark for SMEs prioritising advanced fraud prevention, fostering confidence in financial dealings and providing a stable foundation for growth. This prompts a thought-provoking exploration of how routine checks drive transformative business effects in the competitive landscape.

The role credit facility providers play in anti-fraud

Ensuring secure and diverse payment options is vital for merchants seeking peace of mind. Credit facility providers like Mobicred, offering Buy-Now-Pay-Later services, simplify processes for merchants, eliminating the need for manual follow-ups and reducing financial risks from missed payments. These facilities conduct credit checks and affordability assessments, ensuring products reach legitimate customers. The benefits extend to both merchants and customers, providing manageable payment plans and minimising fraud risks. Collaboration between credit facility providers and affordability analysis tools strengthens anti-fraud measures, presenting a revolutionary approach for SMEs navigating the complexities of digital transactions.

“There continues to be a cat and mouse game being played by fraud syndicates and credit providers. As syndicates become more sophisticated with their methods, so do credit providers in enhancing their security requirements. The credit providers try to keep the customer experience as frictionless as possible; they do this through customer education, machine learning, integration of biometrics and regular system monitoring for any irregularities. “

Revolutionising data analytics for SMEs

In the world of data analytics evolution led by platforms like Gathr, affordability data isn’t just important—it’s the key to making smart decisions for small businesses.

By examining over 80,000 bank statements in October, Gathr found that 3.29% of them were fraudulent. This isn’t just about catching fraud— it’s about recognising patterns to prevent fraud in the future. It makes you think: What else can we learn from our data to stay one step ahead and make smarter decisions? The ability to understand customer behaviour, preferences, and financial capacity positions SMEs to tailor their offerings and financial terms strategically.

Reduced defaults, improved cash flow, and enhanced stability pave the way for sustainable growth. SMEs need to stay ahead with strategic approaches and leverage data analytics, so that they can navigate the complexities of the financial world with confidence


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