5 Identity Theft Challenges Every Business Needs to Tackle

By Nathaniel Cole, CISO at TreviPay [ Join Cybersecurity Insiders ]
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As more businesses move online, establishing an e-commerce channel is essential to meet buyer expectations for speed and convenience. But as more activity is conducted online, businesses face a rising threat that canā€™t be overlooked: business identity theft. This especially rings true for businesses serving other businesses, or B2B organizations. In 2024, over one-third of online merchants experienced business identity theft, posing a problem for a companyā€™s bottom line, reputation and customer trust.

Business leaders are more concerned about business payment fraud during the holiday season, and rightfully so, since business payment fraud attempts spike during this time. As criminals continue to get smarter, the damage from these attacks can impact business stability. With 96% of U.S. companies reporting being targeted by at least one payment fraud attempt in the year, it is important that businesses understand the risks and take action. Here are five common challenges businesses face with identity theft, and what you can do to stay ahead.

The Complexity of Business Identity Theft

Business identity theft is far more complex than consumer identity theft. It often involves large-scale financial fraud, tax evasion and supply chain manipulation. One of the simplest and most common tactics is email spoofing, where criminals impersonate a legitimate business email domain to commit wire fraud, attempting to trick companies into transferring funds or shipping goods by appearing as a trusted partner. In these cases, the attackers often have minimal information beyond the email domain itself, relying on deception to prompt quick responses.

Another tactic is the use of shell companies, which criminals create and then let ā€˜ageā€™ to help appear legitimate. Some fraudsters also leverage recently inactive or defunct business identities to give their schemes a veneer of credibility. This issue is especially challenging in regions like the UK, where public databases make it easier for criminals to identify dormant or expired business identities to exploit. The result is often financial loss and reputation damage for the companies that unknowingly interact with these fraudulent entities. Staying ahead of these tactics requires companies to adopt advanced technologies, like AI and machine learning, to monitor for unusual behavior and detect fraud before it causes damage.

Rising Costs and Financial Repercussions

Business identity theft carries heavy financial consequences, from direct losses to the costs of recovering stolen funds. Unfortunately, many businesses can only recover a fraction of what is lost ā€“ most less than 10% of what is stolen. With the increasing sophistication of these crimes, recovery is becoming harder and more costly. Compounding the problem, many cyber and security insurance policies no longer cover wire or payment fraud, reflecting how widespread this threat has become. Business disruptions caused by fraud can also lead to downtime, missed sales opportunities and higher insurance premiums. To protect your bottom line, businesses must invest in solid security solutions.

Reputational Damage and Long-Term Impacts

The fallout from business identity theft goes beyond financial loss. When fraud occurs, it can shake the confidence of customers, partners and suppliers, undermining trust in the business. Once a company has been targeted, it may even face repeated attacks as stolen data is often resold and reused, sometimes resurfacing in new fraud attempts even years later.

As many as 66% of consumers report they would not trust a company following a data breach. In some cases, legal or regulatory penalties can follow, adding further strain on a companyā€™s reputation. Recovery can take years, and for some businesses, the trust theyā€™ve lost is often never fully restored. This lasting damage to a brand, especially in a competitive market, can significantly impact growth and customer loyalty. Addressing identity theft is not only about preventing immediate loss but also about protecting the long-term health of the business.

Balancing Security with Customer Experience

Businesses must strike a delicate balance between enhancing security and maintaining a smooth customer experience. Adding layers of security, like multi-factor authentication, identity verification and fraud detection measures, can slow down the transaction process, potentially frustrating customers. However, neglecting these safeguards leaves businesses open to attacks. A common protective measure is limiting shipping locations to verified business addresses and preventing changes in transitā€”methods often used to deter fraudsters who gain access to accounts via business email compromise. In these cases, attackers may phish an employee to obtain access, then use the compromised account to place orders.

The challenge is to integrate these security measures in ways that donā€™t disrupt the customerā€™s journey, such as using fraud detection systems that work in the background without interfering with purchases. This balance is especially critical as flexibility in payment options plays a huge role in customer satisfactionā€”78% of buyers say invoicing is a must, and over half would switch to a different merchant if they offer flexible net terms. Balancing security and customer needs keeps your business safe while building loyalty and average order volume. In fact, TreviPay company research found that retaining a business buyer for seven years can lead to a 150% increase in revenue per customer, jumping to 240% after ten years.

Finding the Right Fraud Prevention Expert

Fighting fraud requires a lot of work. Given the complexity of identity theft and the increasingly sophisticated tactics used by criminals, businesses can benefit from partnering with external fraud prevention experts. These specialists can provide the expertise and tools needed to safeguard against emerging threats while allowing companies to focus on their core business operations. Leveraging third-party providers for real-time decision-making, credit risk assessments and transaction monitoring can help businesses stay one step ahead of fraudsters. As fraudsters use increasingly advanced technology to outsmart existing defenses, having a trusted partner with deep industry knowledge and the right technology is critical to ensuring long-term protection and peace of mind.

To ensure end-of-year sales are safeguarded during the busy holiday season, companies must recognize business identity theft is present, complex and can have long-standing impacts on customer trust and public reputation. Leveraging partners with fraud prevention tools and expertise can also help quickly combat suspicious transactions, while allowing business leaders to focus on driving revenue and meeting buyer payment preferences. By offering seamless, consistent and financially secure experiences, businesses can boost buyer loyalty and order values for the holidays and beyond.

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