4 Ways Payment Automation Reduces Fraud in Vendor Transactions

Vendor payments are supposed to be routine. Predictable. Maybe even boring.

Fraud makes them anything but.

In many organizations, accounts payable still runs on a patchwork of email requests, spreadsheet tracking, manual invoice entry and approvals that depend on who’s available (and how convincing the message sounds). That’s a problem, because vendor fraud doesn’t need to break your systems to work; it just needs to slip through your process.

And it’s slipping through everywhere. In the 2025 AFP Payments Fraud and Control Survey, 79% of organizations reported attempted or actual payments fraud activity in 2024. Meanwhile, the FBI’s Internet Crime Complaint Center (IC3) reported $2.77B in Business Email Compromise losses in 2024, a scheme that often starts with an “urgent” vendor bank-change email.

The good news: you don’t have to “outsmart” every fraudster. You just need controls that make fraud hard to execute and easy to detect.

This is another way payment automation earns its keep: not as a shiny workflow upgrade, but as a practical layer of vendor risk management.

Key Takeaways (for Finance, AP, IT and Risk Teams)

Manual AP creates fraud openings at the exact moments you’re busiest: vendor onboarding, bank changes, approvals and payment release.
Payment automation reduces vendor fraud by consistently enforcing vendor validation, approval controls and audit trails, not just “when someone remembers.”
The goal isn’t perfection. It’s shrinking the “gray zone” where fraud can hide, and speeding up detection when something looks off.

Why Manual AP is a Fraud Magnet

Fraud in vendor transactions usually falls into a few repeatable patterns. If your process is manual, each pattern has a natural advantage.

1) Vendor master file manipulation (the quietest, most expensive trick)

A fraudster (external or internal) changes a vendor’s bank details, address or contact info, then routes legitimate payments to the wrong account. Sometimes it’s a brand-new fake vendor. Sometimes it’s a real vendor with “updated” remittance info.

Manual risk factor: changes come through email, get keyed in by hand and approvals are informal (“Looks fine to me”).

2) Business email compromise (BEC) and phishing that targets AP

BEC doesn’t look like “hacking.” It looks like pressure:

“We changed banks, please update today.”
“We need this wire released in the next hour.”
“CEO approved. See forwarded thread.”

This tactic keeps working at scale. IC3’s data shows BEC is still driving billions in losses.

3) Fake, duplicate or altered invoices

Common examples:

Duplicate invoices submitted with small changes (invoice number, amount or line item descriptions)
“Look-alike” vendors (almost the same name and address)
Inflated charges buried in a busy month-end close

Manual risk factor: invoice review is time-constrained, and duplicate detection is often visual (which is another way of saying: unreliable).

4) Approval bypass and “rubber-stamp” risk

When approvals happen via email, chat or a quick desk drop-by, it’s hard to prove who approved what and easy for a fraudster to impersonate an approver.

Manual risk factor: exceptions become normal, especially when teams are understaffed.

How Payment Automation Reduces Vendor Fraud (Control by Control)

Think of payment automation as a system that replaces “best effort” controls with default controls. The best platforms speed things up and make it harder to do risky things quietly.

Control #1: Vendor validation that’s consistent (and hard to bypass)

Vendor risk management starts before the first invoice hits your desk.

With automation, vendor onboarding can require structured data (not free-form email), plus verification steps and documentation that live in one place. More importantly, it can enforce rules for vendor changes, where fraud often happens.

Fraud-resistant vendor validation practices automation supports:

Standardized vendor onboarding with required fields and supporting documents
Duplicate vendor detection (flagging same tax ID, address, bank account or similar name patterns)
Segmented permissions (the person who adds a vendor isn’t the person who approves the vendor)
Controls for bank-detail updates (dual approval, mandatory reason codes and verification steps)

This reduces the chance that someone can “just update it real quick” and move on.

Control #2: Approval workflows that use role-based access (not trust-based access)

Most teams already believe in segregation of duties. The challenge is enforcing it when the process lives in email.

Payment automation can route approvals based on:

Spend thresholds
Vendor risk levels
Invoice types (utilities vs. one-time vendors vs. refunds/credits)
Exception flags (new vendor, new bank account, unusual amount or out-of-policy terms)

What changes in practice:

Approvals are tied to authenticated users (not “Forwarded: Approved”)
Routing is automatic and documented
Exceptions are visible (and measurable), instead of “handled offline”

And when risk needs extra friction, like a vendor bank change, you can require it.

Control #3: Payment controls that reduce the “point of no return”

Vendor fraud loves irreversible payment methods and rushed release cycles.

Automation helps by adding guardrails at the moment money leaves your account:

Payment release controls (who can initiate vs. who can approve vs. who can release)
Approval limits and tiered authorization
Scheduled payment batches (so ad-hoc urgency stands out)
Exception queues for review before funds move

It also helps teams shift away from high-risk workflows. For example, AFP’s survey highlights that checks remain a major fraud target, with a large share of organizations reporting check fraud attempts.

The broader point: when payments are controlled through a single system, you reduce the number of “side doors.”

Control #4: Audit trails that make fraud easier to detect (and harder to deny)

Fraud thrives in ambiguity. Audit trails remove ambiguity.

A strong automation platform creates a clear record of:

Who added or changed a vendor record
Who approved the invoice
Who released the payment
What changed, when and why
What exceptions were flagged (and how they were resolved)

That matters because fraud can persist for months before it’s detected. ACFE reports that a typical fraud case lasts about 12 months before detection and estimates that organizations lose 5% of revenue to fraud each year.

You can’t control what you can’t see, and you can’t prove what you can’t trace.

A Quick Fraud Exposure Check for Your Vendor Payments Process

If you want a practical starting point, use this as a simple internal assessment. The more “no” answers you have, the more your current process relies on vigilance instead of controls.

Vendor validation

Do we require structured onboarding (not email-only) for new vendors?
Are vendor bank changes verified using a process separate from the request channel?
Do we detect duplicates (vendor name, tax ID, bank account and address)?

Approvals

Are approvals role-based and enforced by the system (not informal)?
Do new vendors, bank changes and large invoices trigger additional approvals?
Can one person create, approve and release a payment?

Auditability

Can we produce an audit trail quickly for vendor creation, invoice approval and payment release?
Do we track exceptions and overrides (and review them quarterly)?
Do we have reporting that shows where risk concentrates (vendors, payment methods, teams or regions)?

Making Automation Part of a Broader Fraud Strategy

Payment automation is not a replacement for strong policies, but it makes strong policies livable.

A good operating model usually includes:

Process: written procedures for vendor onboarding, bank changes and payment exceptions
People: training AP and finance teams to spot BEC patterns and escalation triggers
Technology: automated controls, centralized audit trails and visibility across payment types

When these three align, fraud prevention stops being a heroic effort and becomes a repeatable system.

Recommended Next Steps (Minus the Sales Pitch)

If you’re responsible for AP, treasury, finance leadership, IT or risk, here’s a practical way to move forward:

Map your current vendor payment workflow (vendor setup, invoice intake, approval and payment release).
Identify where decisions happen outside a system (email approvals, manual bank changes and spreadsheet vendor tracking).
Prioritize the highest-impact controls (vendor validation, approval enforcement and audit trails).
Set a review cadence for exceptions and overrides because that’s where fraud often hides.

If you want deeper reading as you evaluate options, these REPAY resources can help:

FAQs

How does payment automation prevent vendor fraud?
It reduces vendor fraud by enforcing vendor validation, routing approvals with role-based controls and creating audit trails that expose suspicious changes and exceptions.

What is vendor master file fraud?
It’s when someone creates a fake vendor or changes a real vendor’s details (often bank info) so payments go to the wrong destination.

Why is Business Email Compromise so effective against AP?
Because it targets process gaps — such as urgent requests, informal approvals and bank changes handled through email — rather than exploiting technical vulnerabilities.

What controls matter most for vendor bank changes?
Dual approval, out-of-band verification (not replying to the same email thread) and an auditable record of who made the change and why.

Does automation help with audits?
Yes. It centralizes documentation and produces a consistent record of approvals, changes and payment release activity, reducing audit scramble and improving traceability.

What’s a good first step if we’re not ready to automate everything?
Start with bank-change controls and approval enforcement. Those two areas often reduce the highest-risk fraud scenarios fastest.