Why are fraudsters targeting B2B companies?

There’s so much online about B2C (business to consumer) fraud, but no one’s talking about B2B (business to business).

If your business is B2C, why should you care?

B2B fraud can tell you a lot about the wider fraud landscape and fraudster behavior. Why are more fraudsters trying their luck with B2B? What does this say about future B2C attacks? If you’re aware of fraud trends across different businesses, it could help you recognise emerging fraud in your own business.

We spoke to Egle Nartautaite, Fraud Manager at the global shipping and mailing company Pitney Bowes, to shed some light on B2B fraud patterns and how to manage the threat.

First off, what is B2B fraud?

B2B fraud is a lot like B2C. Both often involve credit card fraud and account takeover. Fraudsters can place high-value orders with stolen credentials, or hack existing accounts and redirect funds to siphon off your company’s money.

How does B2B fraud differ from B2C fraud?

The biggest difference is that B2B fraudsters can often go after credit lines. They use social engineering techniques, forged documents and fake websites to pass business credit checks. Once they're an approved business, then can use their credit lines for fraud in a variety of ways, depending on the type of credit available.

At Pitney Bowes, fraudsters can target small credit lines for postage and shipping. This allows them to print stamps or labels for free and use them in wider fraud schemes to save on operational costs/maximize profits. Or they can go for gold and target our equipment financing service. We provide credit lines for applicants who want to buy equipment like medical machines or construction tools from our trusted vendors. If a fraudster applicant colludes with a vendor or creates a bogus vendor, the money can go straight into their pockets. The value of one transaction can range from a few thousand dollars to a few hundred thousand, so there's a lot at stake.

What are the most common types of B2B fraud?

New types of B2B fraud are always emerging. One of the most common schemes we see at Pitney Bowes are bogus businesses. Fraudsters will basically create fake companies to become your customer and steal from you. You’d be surprised how much it happens. A bad actor will open new applications with a bogus business after they’ve boosted their credit scoring through manipulation of data. In this type of attack they usually drain their credit line and disappear as they never intended to repay.

Business identity theft is also common. A fraudster will act as an owner of a legitimate company to gain access to credit lines or get physical goods to resell. It’s so easy! You could go on LinkedIn, find a person to impersonate and get pretty much all the information you need.

Why is B2B fraud a growing problem?

Customer habits are changing with the digital shift

Buyers want to make purchases in as few clicks as possible. In the past, they’d interact face-to-face with sales teams, so you’d know what the customer looks like. Now, you’re lucky if their camera is turned on in a Zoom call. This culture makes it so easy for fraudsters.

B2B businesses are easy targets

B2B companies are becoming more appealing targets. B2B fraud prevention is slightly behind B2C. If a fraudster gets blocked by a B2C merchant, they might be successful with the same tactics on a B2B business. The harder it gets for fraudsters to target B2C, the more likely they’ll look elsewhere.

B2B businesses can be lucrative for fraudsters

B2B businesses can be fraud goldmines. In physical goods reselling schemes, quantities and price-tags can be bigger. If you sell office equipment, fraudsters could order hundreds of ergonomic office chairs and it could appear completely normal. And if fraudsters go for B2B credit lines, the reward can be huge. You don’t have the operational burden or costs of reselling so it’s 100% return - cash in hand.

How do you identify B2B fraud at Pitney Bowes with Ravelin?

We’ve been working with Ravelin on our rules and to identify risk factors. It’s been a real team effort. Together we made our model rule-based, and can now easily feed in credit information and other data points to assess risk. Our system flags high-risk transactions and we look out for suspicious signals.

How does fraud impact B2B companies?

Fraud financial loss could run your business into the ground

Where there’s fraud, there’s financial loss. But for B2B companies, the financial impact can be huge. You might lose hundreds of thousands of dollars to one successful fraudster, and it could instantly run your business into the ground.

Brand damage can be catastrophic

If news spreads that your business has been defrauded, it can be disastrous. Your clients lose trust in your internal systems and could end the relationship. It’s then so difficult to regain trust and win future sales.

What are the key challenges B2B companies face when tackling fraud?

It’s hard to convince business leaders that fraud is a problem

B2B companies and business leaders often don’t consider fraud as a priority. They think fraud solutions will increase friction for customers and reduce profits. But it’s the opposite! Fraud mitigation helps your business mature and reduces your losses.

Many B2B businesses don’t have fraud teams

A lot of B2B companies don’t even have fraud teams! You get KYC (Know Your Customer) and credit teams vetting new customers instead. But it’s not the same. You need a specialized fraud team to spot new fraud trends or indicators.

There are very few fraud vendors for B2B business

Finding the right fraud solution or vendor can be really hard. Every B2B company has unique needs, risks and budgets, so you need a bespoke approach. But very few vendors can help verify other businesses, and if they do they’re often expensive.

Is it fraud or bad debt?

It can be hard to get your business to decide what you class as fraud and what’s bad debt. It’s obvious when you get a fraudulent chargeback, but when lines of credit are involved it’s tricky.

What advice do you have for B2B companies to manage their fraud strategy in 2022?

Educate your business and spread the word

B2B fraud isn’t new, but companies are only now beginning to recognise that it’s a problem. My advice? Educate your business on the threat. You’re never safe. Either you don’t know about your fraud yet, or it’s just about to hit you.

Fraudsters are getting smarter so you need to be proactive

There’s no machine learning model that will ever do your job 100%. Fraudsters are constantly getting smarter, so you need to be proactive. If you aren’t, fraud could hit your bottom line so badly you’d never recover.

For more information on how to create a bespoke fraud prevention strategy for your business, read the solutions guide or watch the webinar.