A recent Report of Nations survey suggested that frauds account for 5% of annual revenues in any organization. The technologies that can help prevent payment frauds: Artificial Intelligence, Blockchain and more!

1. Defeating vendor payment frauds with advanced
technology – AI, Blockchain and more...
By Jesal Mehta

2. Background of Vendor frauds and Impact on companies
In August, Toyota Boshoku was fleeced of $37 million in a payment fraud scam using
3rd party payment transfer. This incident shocked the industry, considering the
stringent approval standards followed by major public companies. However, Toyota’s
problem is not an isolated incident.
A recent Report of Nations survey suggested that frauds account for 5% of
annual revenues in any organizations. Fraud payments to ghost vendors,
unauthorized vendor invoices and misusing funds for wrong item codes had plagued
the industry for a long time. Historically, to curb the incidents, organizations use
practices of random audits or combing through financial transactions – essentially,
retrospective actions. These practices hadn’t found enough success as each activity
is not yet imbibed in the organization.

3. The frauds provide a macroscopic view of
• Growing volume and complexities of business transactions
• Ability (lack thereof) to manage this growing web of transactions with
legacy technologies
• More focus on the cure of the problems, instead of prevention of the
frauds
An organization should change gears from mere detection to proactive
prevention – identifying organizational behavior to norms at the granular
level and identifying potential fraud activity proactively than reactively. The
organizations should use a combination of the following 3 ways to curb
frauds.

4. Artificial Intelligence
Ant Financial has led AI evolution in payment processing using the rich financial
transactions database on a single platform(mobile). Ant Financial has embedded AI as the
central engine across all business units. A similar digital strategy is necessary for B2B
vendor payments. Similarly, organizations can bring all functions (procurement,
accounting, operations) on a single platform and integrate the data to aggregate and
analyze billions of transactions.
Artificial intelligence can comb through all transactions and flag the anomalies within the
system to combat frauds create internal dashboards displays all risks and provides visibility
across categories help AP team to approve all transactions without impacting AP cycle time
However, AI adoption depends heavily on quality datasets and good system integrity to
utilize machine learning algorithms. Hence, the first step for organizations is to focus on
continuously uploading new master data and validating existing data for a unified procure-
to-pay solution.

5. Blockchain
Maersk is thinking on solutions over Blockchain platform to improve supply chain and
eventually vendor management. In current shape, blockchain offers to build use cases
such as payment frauds, validating vendors or item categories.
Using blockchain, organizations can improve data integrity, authorize vendors, define
new catalogs or increase the validation of vendor payments. As the historical
information resides within an organization, financial forensics will be vastly improvised.
The rich information database will further reduce the need for invoice scanning and
improve reconciliation process.
Despite multiple benefits, high costs of integration and high capital investments hinder
the widespread adoption of Blockchain. Probably, the baby steps of adopting blockchain
in small units might eventually strengthen the need for blockchain.

6. What Next? Culture for Change
All the above technological reforms in organization hinge on how
people within the organization accept these changes and redesign
processes to gain technology competitiveness.
In all, organizational leaders should focus on developing the culture
and mindset among people to incorporate new-age technologies to
defeat vendor payment frauds.
The million-dollar question remains “How do we change the
Organizational culture for adoption?”
Aavenir product portfolio caters to Artificial Intelligence-powered Procure-to-Pay
(P2P) on the ServiceNow platform. Aavenir AP automation and Aavenir CLM
product are already available on the marketplace.