Michael Ault, CEO of UTP spoke to PaymentExpert about how fraud has evolved throughout the pandemic, as the firm has supported SMEs in their efforts to minimise the threat they are faced with.
PaymentExpert: Firstly, can you tell us more about UTP Group and how the firm has adapted its offering throughout the pandemic?
Michael Ault: UTP Group is an ISO of Barclaycard and we have been providing merchants services and payment solutions since January 2014. We offer a wide range of credit and debit card machines from fixed countertop terminals to portable and online payment gateway solutions.
When the pandemic hit there was a seismic shift globally towards card and contactless use, resulting in a drop in cash. Credit card machines have never been so in demand from new customers, but also existing merchants who required an upgraded machine due to an increased reliance on them. At UTP we had to change and adapt our product offering to meet the demands of our customers.
In January of this year, we saw a deceleration in fixed countertop machines, dropping from 28% down to just 20% of all card machine use, whereas in the same period demand for portable card machines jumped from 52% to 62%. This trend acceleration is a direct effect of the pandemic as business’ preferences shifted to accommodate the new regulations they had to adhere to, including social distancing and table service.
PE: How have you supported SMEs as the pandemic has grown?
MA: SMEs have faced huge challenges throughout the pandemic and payment providers have seized the opportunity to deliver significant innovation. At UTP our focus over these past 18 months has been to support and provide help to those businesses in need. Businesses that previously had relied on cash were now turning towards credit card machines and the daunting move not only resulted in operational challenges, but also financial ones.
Not only did we adapt the hardware of the payment terminal to help SMEs, but the service rates offered were adjusted too, to ensure businesses could trade in the new post-covid world.
Change has always been a constant in the industry, however, when small businesses are faced with increased competition, lower footfall and high rent, cash flows will inevitably be under pressure. When the pandemic hit, we ensured that all our customers, new and existing, were provided with a reliable and efficient terminal that is designed to help merchants take control of their cash flows.
In April 2021 we launched our new Android terminal, the UTP Pro. This was designed with customers at the forefront and allows merchants to receive transactions the same day, or even within the hour. This new concept called Faster Processing has had a dramatic effect on merchant’s cash flows and allows them to witness fraudulent activity in real-time.
A recent customer survey found that 100% of respondents felt that Faster Processing allowed them to better manage their business and improve their cash flow and at UTP we strive to innovate in the market and improve services to help support merchants and SMEs.
PE: How significant is the threat of payment fraud for SMEs?
MA: SMEs are the most likely to be targeted by payment fraud, yet not all are aware that they are in the high-risk category. Many SMEs believe that they will never be subject to fraud, yet studies, including a recent one by Barclays Bank, debunk this by showing that the average cost of fraud to a business is £35,000. This is a huge sum of money, especially for small sized companies.
As many SMEs are unaware of the potential risks, fraud prevention strategies are essential to combat this occurrence.
There are many types of fraud that could affect an SME, these range from product theft, cyber fraud and CNP payment fraud, and without the proper controls to prevent fraud, SMEs can be seriously affected with 23% of SMEs claiming to be victims of fraud. If fraud levels exceed the determined threshold (roughly 1%) stipulated by payment schemes like Visa and Mastercard, SMEs are likely to face costly fees and fines that they can ill-afford.
In fact, if fraud rates exceed thresholds by a significant amount, businesses could be shunned by payment processors altogether, dealing a damaging blow to their bottom line.
PE: In terms of phone fraud, how does UTP Group enable SMEs to ensure their strategy is as efficient as possible?
MA: When the Covid-19 pandemic began, businesses from all areas were forced to close physical stores, encouraging many SMEs to venture into the eCommerce market. This move online led to many businesses being exposed to the threat of fraud and any business that accepts card payments online or over the phone was at risk. Phone payments can be safe as long as SMEs have the correct security in place such as PCI and SCA protocols.
On top of ensuring that the card security code and address on a bank card are verified for payment, there are many other additional checks an SME should take to protect themselves. Some top tips we believe all businesses should follow to mitigate against CNP fraud include:
- When delivering goods, always use a reputable carrier who can provide proof of delivery.
- Only deliver goods to the address given by the cardholder when performing the address check. Be wary of orders to an address where the recipient can’t be identified as the cardholder. A fraudster may have temporary access to a delivery address.
- Be very cautious if the customer decides that they want to collect the goods. In this circumstance you should refund the original transaction and start a new one as a cardholder-present chip and PIN transaction.
- Never release goods to a third party (such as a taxi driver or courier) who claims they were sent by the cardholder.
PE: Can you tell us more about the role of the effective use of data in combating fraud?
MA: Data analysis is crucial to the day to day running of a business and is essential in providing information to detect and also prevent fraud. New software that is being installed into payment terminals, such as Faster Processing, allows SMEs to view all transactions they make daily. It allows the business to quickly identify which transactions throughout the day are genuine or not.
Any mistakes can be identified quickly and rectified without any lasting damage. Data can also help businesses realign resources and determine where detection efforts need to be in the business.
A recent study also found that proactive data monitoring was associated with 52% lower losses and frauds detected. By collecting data through payment terminals, the impact can be significantly noticed by small businesses and is an essential asset for all SMEs to possess.
PE: Lastly, are you able to predict how you think fraud will evolve as we emerge from the pandemic?
MA: The Covid-19 pandemic presented some significant logistical challenges for businesses, and these could potentially continue. Many businesses realised the opportunity to transition to an online environment, and most of these are insisting on maintaining this profile with business leaders seeing the long-term benefits of embracing a digital transformation and embracing the positive changes to their business models. However, it would be dangerous to disregard the concerns that arise with this revolution.
Fraud has continued to develop and evolve throughout the pandemic, and we don’t think this trend will stop anytime soon. Fraudsters are becoming more sophisticated and are targeting smaller businesses more than ever, yet the evolution of digital transformation allows merchants to stay one step ahead and prevent rather than cure.
Remote technology, AI and fraud prevention initiatives have allowed SMEs available access to these necessary services to protect their businesses. So yes, fraud will be here to stay however the innovation of the fintech industry is allowing SMEs the best chance to fight against it.