Canadian Businesses Face Higher Payment Fraud Rates Than Consumers

A new study by Payments Canada highlights a troubling trend: Canadian businesses are more susceptible to payment fraud than consumers. With 20% of businesses reporting fraud incidents compared to 13% of consumers, the study reveals that while the types of fraud are similar, the business sector bears a heavier burden.

Common Types of Payment Fraud

Impersonator fraud remains the most prevalent type, accounting for 25% of incidents. This involves scammers posing as trusted business contacts through phone calls, emails, or messages to deceive targets. Intercepted e-Transfers follow closely at 22%, where funds are rerouted to fraudulent accounts. Credit card fraud is also common, making up 20% of cases.

Despite these risks, the majority of businesses (63%) lost $3,000 or less. This suggests that while fraud is frequent, most losses remain relatively small. Even so, the overall rate of payment fraud has stayed consistent at 19% since 2023.

Larger Businesses Hit Harder

The study also reveals that larger commercial businesses experience more payment fraud than their smaller counterparts. Large commercial businesses reported the highest fraud rate at 26%, compared to large businesses (23%) and small businesses (16%). Although businesses of all sizes are targeted, the larger scale of operations seems to make bigger firms more attractive to fraudsters.

Businesses Increase Vigilance but Remain Vulnerable

Many businesses are stepping up their efforts to combat payment fraud. Nearly 69% limit sharing sensitive information online, and 67% check the security of e-commerce sites before making purchases. Additionally, 65% enable two-step authentication for account access. However, gaps remain in areas like password management, where 39% of SMEs and 41% of commercial businesses store passwords insecurely, and a significant portion uses the same password across multiple accounts.

Fraud Awareness Grows, But Concerns Persist

Despite increased awareness and preventive measures, 45% of businesses have noticed a rise in fraudulent activity via email, while smartphone, social media, and e-commerce sites are also becoming hotbeds for scams. As a result, 44% of businesses report that fraud concerns influence their payment choices and behaviors.

Seeking Greater Protection

A significant number of businesses feel confident in their financial institutions’ ability to protect them, with 70% being fully or partially reimbursed after fraud incidents. However, many remain cautious; over 65% would prefer to take extra steps to secure online transactions, even if it means a more cumbersome process.

The Need for Enhanced Security Measures

Donna Kinoshita, Chief Payments Officer at Payments Canada, emphasizes the importance of a multifaceted approach to address these threats. She suggests that emerging technologies such as biometrics, AI for fraud detection, and centralized fraud systems, alongside improved industry collaboration, will be vital in safeguarding Canadian businesses from future risks.

Businesses are willing to adapt, and as Jon Purther, Director of Research at Payments Canada, states, “There is no room for complacency when it comes to protecting against and detecting fraud risks.”

Conclusion

Canadian businesses continue to face evolving fraud threats, and while awareness is growing, the need for vigilance and robust protection measures remains critical. Both large and small businesses must remain proactive to mitigate these risks and protect themselves from an increasingly sophisticated landscape of payment fraud.