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MonetaGo on Invoice Fraud: Why Digitalisation is Our Best Defense

Jesse Chenard, CEO at fintech MonetaGo, looks at why the risk of invoice fraud is higher than ever and analyzes how the landscape is changing. He outlines the reasons why invoice fraud still thrives today and discusses how technology could provide the solution.
Jesse Chenard, CEO MonetaGo

Invoice fraud is as ancient as trade itself – yet businesses across the globe are still falling victim to it. The NMC Health scandal was just one of the many cases last year where invoice fraud could have been mitigated if governments and financial institutions worked together to implement better invoice fraud prevention practices.

As economies across the world begin to recover from the pandemic, we will see a flurry of activity in trade across the globe. While the economic benefits of this are inarguable, another direct consequence of an uptick in activity is an increase in trade fraud and invoice fraud is no exception.

Fraud flourishes where confusion reigns

Fraud flourishes amid uncertainty, chaos and outdated processes, which tend to be those that are paper-based. Over 80% of global trade relies on trade finance, yet many financial institutions still rely on paper-intensive documentation and clunky legacy systems, leaving invoice finance susceptible to fraud.

In 2018 the global invoice factoring and finance market was worth $2.9 trillion. It’s time for government and financial institutions to come together and provide innovative solutions for fraud prevention.

The key to preventing the confusion which allows fraud to flourish, is to streamline trade finance processes and make it simple for financial institutions to detect and prevent fraud. Digitising paper-based workflows enables better recording of transactions and permits mistakes and fraud to be more easily spotted. Building an inclusive trade fraud prevention solution that operates at the industry level brings clarity and pro-actively prevents fraud. The more financial institutions that use the solution, the more the risk of double financing is mitigated.

To truly mitigate invoice fraud, financial institutions and governments need to co-operate at the industry level to build a holistic solution that works for all parties – individual company policies can only go so far. In order to eradicate invoice fraud, all parties need to be on the same page and able to securely share information to detect and prevent invoice fraud.

Looking to a digital solution

Many of the challenges outlined above could be solved through industry-wide co-operation and digitisation of trade finance. For this to work, legacy systems and paper-based workflows need to be overhauled.

Distributed ledger technology is one of the most powerful solutions which would enable financial institutions and governments to mitigate invoice fraud. With blockchain, huge amounts of paperwork could be verified and processed automatically. An immutable blockchain ledger could provide transparency over the transportation and processing of physical and online goods.

By taking select information from invoices, hashing them so they can’t be used to obtain primary customer information, and then uploading them onto a distributed, decentralised ledger, it is possible to prevent duplicate financings in real-time, while simultaneously protecting sensitive information related to clients and market share.

Since the data can be securely shared between all network participants, the distributed repository prevents duplicate factoring by the financier prior to trade confirmation. Blockchain makes it simple for financiers to check whether an invoice has already been financed by another party. Once a financier has chosen to finance an invoice, it is then clearly marked on the distributed ledger. It is also possible to automatically validate the authenticity of invoices by checking the information against available tax information associated with each invoice. In other words, this type of system can eliminate the risk of fraud in invoice finance entirely.

Co-operation at the industry-level and digitisation of fragmented legacy systems through new technologies is the key to mitigating fraud in invoice finance. Cross-border flows could be tracked from start to finish, and the need for paper could be eliminated entirely. With the right technology, we can learn and evolve from the lessons of invoice fraud, mitigate future occurrences, and allow all countries to prosper through safe and secure trade.


  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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