Double protection against receivables fraud


Double protection against receivables fraud

Authors: Ahmed Amin & Owain Chambers 


In 1977, the Harvard economist JK Galbraith upset the UK Government with a BBC TV series called The Age Of Uncertainty. His critique of the free market economy led Margaret Thatcher to condemn the series as biased and inappropriate for state-funded TV. Yet any instability that Galbraith identified in the UK economy is nothing to what the business world is navigating today. A new age of uncertainty began with the pandemic crisis and continues to gather momentum through economic turbulence fuelled by inflation, supply chain breakdowns and the Ukraine war. And with the upcoming elections in the UK and US likely to rock the boat further, there’s no obvious end in sight.  


Through our involvement across the loans market, we’re seeing the pressure that this is placing on both lenders and their investors. On the one hand, there’s an increased appetite to lend, and we’ve seen particular growth in invoice financing. Yet at the same time, there are increasing levels of fraud within receivables finance. In our most recent European Fraud Readiness Report, we found that 89% of lenders felt fraudulent activity had increased in the previous year and 70% said that fraud is a significant risk to their receivables finance business.  


Furthermore, the experience of our clients suggests that, with invoice financing in particular, there’s a clear correlation between rising fraud and the fragile nature of the economy. Most receivables finance defaults don’t spring from cynical, deliberate fraud, but are more often down to businesses getting stretched financially, issuing a few invoices early to cover their costs, and then finding themselves spiralling into difficulty. 


The challenge for lenders is to identify these issues as early as possible, and provide additional assurance to their investors. We do of course specialise in this area through Lenvi Riskfactor, which has been adopted by more than 90% of UK lenders. By colour-coding your entire portfolio and monitoring it daily, Riskfactor not only accurately identifies fraud, but does it very early, before the numbers start piling it up. Our blanket coverage of the UK market demonstrates that, unless you’re a very small lender, there’s no good reason not to invest in Riskfactor. From our experiences to date, it can help to reduce lender provisions year on year by 10-25%. That’s clearly a very attractive outcome for both the lender and the investor, and we have now extended the offer to several other parts of the EU. 


At the same time, our expertise in Standby Servicing allows investment portfolios to be fully administered if something happens to your business. With our backing, both lenders and investors are fully protected from a wide and ever-expanding range of potential risks, with the strength of our service lying in the combination of our market-leading technology and our highly knowledgeable people. Importantly, we are also highly experienced in the complex and specialist area of invocations, and have been successfully invoked in multiple jurisdictions. 


Together, Lenvi Riskfactor and Standby Servicing provide the best possible combination for risk management, portfolio protection and investor reassurance. As a result, we’re now looking at opportunities to package the two services together to provide additional value, cost efficiencies and peace of mind. Do get in touch if you would like to discuss further.