The banking industry has announced a major initiative to help small businesses protect themselves from online fraudsters. The $100 million upgrade will enable customers to verify the identity of the recipients before transferring money.
How the new system works
The new system, called confirmation of payee, will match the names of the payers and payees with their account numbers and BSBs. This will prevent scammers from diverting invoice payments by changing the bank details on the invoices. The system will also alert customers if the name and account number do not match, or if the account belongs to a different bank.
The confirmation of payee system will be rolled out across the banking sector, including commercial banks, customer owned banks, mutual banks, building societies and credit unions. The system will be available for both online and mobile banking platforms.
The system is expected to be fully operational by the end of 2023, and will cover all types of payments, such as direct debits, BPAY, and card payments.
Why small businesses need protection
Small businesses are often the target of cyber criminals, who use sophisticated techniques to impersonate legitimate businesses and trick customers into paying them. According to Scamwatch, small businesses lost $13.7 million to scams in 2022, a 95% increase from the previous year. The most common type of scam was payment redirection, also known as invoice substitution or business email compromise.
Payment redirection scams can have devastating consequences for small businesses, as they not only lose money, but also damage their reputation and customer trust. In some cases, the scams can even force small businesses to close down.
The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, welcomed the banking industry’s pledge to fight scams. He said the confirmation of payee system will offer a practical safeguard for small businesses, who often do not have the resources or expertise to deal with cyber threats.
What else can small businesses do to stay safe
The confirmation of payee system is not a silver bullet, and small businesses still need to be vigilant and proactive in protecting themselves from online fraud. The banking industry and the government have provided some tips and resources for small businesses to enhance their cyber security, such as:
- Educating themselves and their staff about the common types of scams and how to spot them
- Using strong passwords and multi-factor authentication for their online accounts
- Updating their software and devices regularly
- Backing up their data and storing it securely
- Reporting any suspicious or fraudulent activity to their bank and the authorities
- Seeking professional advice if they are unsure or need help
Small businesses can also access the following websites for more information and support:
- Scamwatch, which provides alerts and advice on how to avoid and report scams
- Stay Smart Online, which provides guidance and resources on how to improve online security
- Cyber.gov.au, which provides cyber security advice and services for businesses and individuals
- ASBFEO, which provides advocacy and assistance for small businesses and family enterprises
The banking industry’s pledge to support small businesses in the fight against scams is a welcome move that will benefit the economy and society. By working together, the banks, the government, and the small businesses can create a safer and more secure online environment for everyone.
