Proof of Address Verification in Vendor Onboarding Guide

Onboarding a vendor without having proper guidelines in place can severely impact your business. Vendor onboarding fraud and the consequences that come along can be fatal for a business. So, how can you know the vendor you’re onboarding is the right is not a fraud?

Every business regardless of its nature of business needs to have a vendor onboarding checklist. To avoid instances of fraud that can harm your business, you need to follow the required due diligence.

One of the biggest parts of vendor onboarding is to make sure that you’re keeping up with all the changing laws, rules, and regulations.

What is Vendor Onboarding?

Vendor onboarding is the process of collecting all the crucial information that you need to approve a vendor for your organization. A vendor allows businesses to buy supplies without having to go through a long process. Vendors in turn issue invoices for businesses. Let’s say you onboarded a fraudulent vendor, they’ll end up issuing invoices for things you haven’t purchased. This is how most fraudulent vendors operate and earn money.

The vendor onboarding process needs to have an ideal checklist. By following the checklist, every business can make sure they’re onboarding the right vendor.

Importance of Vendor Onboarding Process

Vendor onboarding is the first step of the vendor management process. If a business doesn’t have a vendor onboarding process, it can become a part of fraud. When you follow a vendor onboarding checklist, you can reduce the risk of fraud, eliminate additional costs, and achieve a higher ROI. 

When you build a vendor onboarding process for your business, it becomes easy to avoid pitfalls that come along with bad vendor management. 

Not just customers, you also need to nurture relationships with your vendors. A well-thought-out vendor onboarding process can help you make your relationships with vendors strong. It also offers other benefits:

  • Reduce or eliminate risks
  • Streamlined process and increased level of efficiency
  • Ensure compliance with regulatory guidelines
  • Build a positive business reputation  in the industry
  • Boost ROI
  • Reduce redundancies and mistakes
  • Track business data and workflows
  • Automate basic tasks

How to Build Your Vendor Onboarding Process?

To start building your vendor onboarding process, you need to keep a couple of things in mind:

  1. Evaluation and Approval Process: Every business should have an evaluation and approval process while onboarding vendors.
  2. Setting Up Requirements and Expectations: Set up clear policies and expectations to make sure there’s no confusion between all the moving parts.
  3. Developing Process for Strategic Supplier Partnerships: Strategic partnerships hold a lot of value for businesses. You need to create a separate onboarding process for all your strategic partners.
  4. Establish a Communication System: Having a clear line of communication matters a lot. Knowing you can reach out to your vendors at any given time is helpful in eliminating redundancies, mistakes, and errors. Plus, it helps in building stronger relationships with customers.

Vendor Onboarding Checklist

To make the process easier, you need to make sure that you’re not missing out on any crucial factors.

Here’s a vendor onboarding checklist you can use.

1. Evaluate Risk Level

Hiring a vendor that has a poor track record can be risky. You need to evaluate the level of risk a vendor brings along with them. Here’s how you can do so:

  • Check business product and service records.
  • Check creditworthiness.
  • Assess vendor compliance level with current regulations.
  • Ask the vendor to sign an ethical code of conduct. 
  • Make backup plans.

2. Collect Information About Products & Services Offered

  • Expected nature, volume, and how frequently you need the supplies. 
  • Ask for product and service specifications.
  • Ask for requirements for placing an order, and the format of order placement. 
  • Have a clear conversation about pricing and discounts. 
  • Clear out payment terms beforehand. 
  • Figure out the delivery process and logistics. 
  • Supplier training requirements or orientation sessions.

3. Collect Information About Vendors

  • Ask for the registered name, address, and contact details.
  • Ask for licenses, insurance, and other important documents. 
  • Vendor bank account verification for creditworthiness check.
  • Contact information of vendor representatives.

4. Make all Information Available for Internal Use

All the vendor information should be available for access by some teams, including:

  • Accounting teams
  • Purchasing teams
  • Warehousing and inventory control

5. Share Necessary Information for Vendors

Your vendors should have all the necessary information when they enter into a relationship with a business.

Here’s a list of what you should share with vendors:

  • Provide correct invoicing details.
  • A record of all the agreed terms and send them for confirmation.
  • Provide contact details for purchasing managers, and logistics teams.
  • Provide training if needed.

Importance of Proof of Address Verification In Vendor Onboarding

Proof of address verification in vendor onboarding is a step that a lot of businesses ignore. Verifying where a business comes from plays an important role in figuring out if they’re genuine or not.

Let’s say there’s a location that’s famous for having risky vendors, or there’s a location that your business doesn’t serve. How would you know the vendor is not from the location?

That’s where online proof of address verification comes in. When you verify a vendor’s proof of address, you can make sure you’re not getting into a relationship with a fake vendor.

DIRO online proof of address verification can help you verify the address of your vendors by verifying the documents provided. DIRO provides 100% accurate results instantly, using proprietary technology.

address verification during vendor onboarding

5 Things You Need to Keep in Mind While Integrating Digital Payments

Digital payments have become the norm when it comes to consumer finance. According to some new reports, emerging payment methods such as account-to-account payments, digital wallets, and Buy Now, Pay Later. More than 80% of all consumers have used digital payment methods in the last 1 year. This number is expected to grow to 93% by the end of the next year.

A lot of these digital payment methods rely on the open banking framework and are a natural progression of shifting landscapes. In our guide, we will be telling you all the ways things you need to consider while integrating digital payments systems into your FinTech solution.

Things to Consider While Building a Digital Payment Method

1. Consumers Want Convenience Over Anything

Consumers all across the globe are using digital payment methods and it’s easy paying bills using this method. Paying bills and managing finances online is easier than any other method.

Subscription bills, utilities, loan repayments, and retail payments are more convenient with open banking-powered apps and services. Around 80% of all customers already know of account-to-account payment, but they may not be aware of the benefits of open banking. Open banking payment methods add speed and efficiency to the process.

2. Consumers Want Flexibility While Making Payments

Almost all global customers want flexibility and control to optimize their digital payments. Similar to the motivations around bill payments, consumers are connecting their accounts to automate the repayment process for BNPL and installment loans. 50% of consumers are currently open to the idea of connecting their bank accounts with other financial services to enable auto payments, and over 52% of customers claim that they want automated repayment solutions to prevent missed payments.

3. Security is the Top Priority for Customers

Consumers understand the value digital payment systems bring to the table. The customers who aren’t on board with digital payment methods are mainly because they think it’s not a secure method of sending money.

If you’re looking to integrate a digital payment system with your FinTech, then you need to build trust about digital payments in your customers. Building comfort with emerging digital payment methods is a key step in supporting future adoption as the two are tied together. Faster transactions, the convenience of payment, transparency, and security are the top reasons for customers to overcome security issues.

4. Consumers Use FinTechs to Keep Track of Their Finances

Consumers are relying on FinTechs and also open baking to get through everyday financial activities. The reason is simple, FinTechs make it easy to handle these tasks than doing them manually. 83% of all consumers have used digital tools at least one time to handle financial activities. Over 50% of customers use technology to complete 4-5 tasks. The majority of users see making payments as the only beneficial use case of FinTech companies and open banking technologies.

5. Latest Technologies are Most Famous Among Gen Z And Millennials

Newer generations are more likely to adopt newer technology compared to older users. When it comes to digital payments younger generations are the ones who pushed forward the use. It’s anticipated that their use case will keep on growing. There are generations who are less likely to make payments compared to younger generations. The percentage is 50 for Gen Z and 78 for Boomers. Younger generations are less likely to use cash for making payments. But security remains a major concern for all generations while using digital payments.

integration digital payments methods

Detecting and Preventing Fraud During Vendor Onboarding

As businesses globally are understanding the importance of employing additional fraud prevention methods, it has led to a dramatic fall in fraud rates. Handling the aftermath of fraud is becoming super expensive for businesses. This is why the adoption rate of new technologies and compliance rate is improving.

Unfortunately, even after several significant changes in the industry, vendor fraud is a major issue. Fraudsters who aren’t able to break into financial institutions and banks move on to vendor fraud. The reason why vendor fraud is one of the most growing categories is that businesses are highly vulnerable to attacks.

For businesses to identify and prevent vendor fraud, proper knowledge is needed. The more knowledge a business has, the better it can protect itself.

What is Vendor Fraud?

Vendor fraud is basically fraudsters manipulating a business’s payment system. This is done to steal goods and money. In almost all cases, vendor fraud is done with the intent of stealing money.

Any business can be a victim of vendor fraud, but it differs from business to business. Vendor fraud can happen through collisions with third parties. It can also happen because of untrained employees within the organization.

The most common examples of Vendor fraud include:

  • A hacker manipulates a business’s payment systems to generate fraudulent vendor payouts.
  • A vendor that fails to falsify receipts or documents slowly steals money from a business through its ongoing transactions.
  • A group of employees wants to steal money from the organization.
  • An employee steals company checks and deposits them into a personal account.

Which Businesses are at a Risk of Vendor Fraud?

Businesses that don’t have the right level of security and scrutiny are at the most risk of vendor fraud. Businesses that are small and mid-sized often fall prey to vendor onboarding fraud.

It makes a lot of sense for fraudsters to target small-scale businesses. More than often,  small businesses rely on small teams to handle a variety of tasks. This can easily lead to mistakes. A lack of robust checks and no adoption of technology can lead to vendor fraud.

As businesses scale up and comply according to laws and regulation, it helps in preventing fraud. Companies that follow all the compliance guidelines tend to be less open to fraudulent activities due to mistakes. To combat the sophisticated methods used by businesses, fraudsters are also developing new methods.

Types of Vendor Fraud

Vendor fraud is different for every organization. There are multiple categories, that include:

  • Billing Fraud: Billing fraud refers to payment-related fraud, it can be done in 2 ways by employees. Sometimes, fraudsters make up a fake vendor, or sometimes the employees make up duplicate payments by using actual vendor details.
  • Fictitious Vendor: An employee with adequate information about a vendor can make up a fake vendor. Or, they can register as a new vendor and get regular payments on this account.
  • Duplicate Payments: An employee can use actual vendor information to make fake information and generate fake payouts. The same payments and extra payments can be transferred to employees’ accounts.
  • Check Fraud: This vendor fraud involves an employee engaging in forging or modifying information available on the check of a vendor. They do this to get payments into their own accounts.
  • Accepting Bribes: There’s another type of vendor fraud that’s quite common. A vendor pays some kind of commission to employees for helping them get additional sales or benefits.
  • Excess Bills: Whenever vendors issue an invoice for bill payment, and if it’s more than the desired amount, it’s called over-billing. This is also considered a type of vendor fraud.
  • Price Fixing: This fraud happens when 2 or more vendors make a deal together and fix the price of a product at a higher value. The buyer has no option other than to pay higher prices to the vendors.
  • Cyber Fraud: This is the most complex type of fraud to detect. Hackers can act as a vendor even when they don’t have any relation to the company. They operate completely from the shadows and they are able to create a fake vendor profile. They try to trick businesses into making payouts for goods and services. Needless to say, all the records and bills are fake and fabricated. This is what makes it one of the most challenging types of fraud to detect.

Detecting and Preventing Vendor Fraud

There are some basic rules and regulations every business needs to put in place to prevent vendor fraud.

1. Vendor Controls

Businesses need to set up a checklist outlining all the guidelines for vendor onboarding. Here are some common things you can keep in mind:

  • Businesses need to follow all the due diligence procedures. There should be extra attention to verifying information provided by the vendors. Online document and online vendor bank account verification technologies can help in streamlining this process.
  • There should be a centralized vendor database with your preferences. There should also be a list of high-risk vendors.
  • Businesses need to conduct thorough checks of all the vendors. Using technologies to do so can save both time and cost.
  • Checking bills issued by vendors is a good practice to make sure you’re paying for things that you don’t have to.

2. Employee Measures

A lot of times employees help vendors orchestrate the fraud. To prevent this, businesses should have some guidelines for their employees:

  • Doing thorough background checks during employee onboarding can uncover hidden red flags.
  • Keeping financial information limited only to high-level employees. 
  • Larger businesses should separate the duties of employees for better accountability and control.
  • A person that’s in charge of handling vendor information should be different than those who approve these vendors into the organization. 
  • Smaller businesses should rotate the duties of employees in vendor/AP/purchase departments. Or to make processes easier, businesses can hire managers for different tasks.

3. Set up Due Diligence Processes

Before you onboard vendors, you need to have a proper due diligence checklist. Having a proper guideline can help newer employees onboard vendors that are legit. As a business, you need to conduct thorough vendor verification. You need to make sure that the mailing addresses are correct. Check if the bank account is legit. Verify if the information and document submitted by them are original and not tampered with.

Conclusion: Vendor Fraud Prevention Guidelines

Vendor fraud can impact your business in a lot of ways. Prevention of vendor fraud requires proper planning and sticking to the plan. Preventive measures should be a priority for most businesses, and they should also focus on technologies that can help make the process easier.

vendor fraud

Five Major Steps for Strengthening your ID Fraud Prevention Strategy

Customers demand a safe and secure environment. This means providing protection from data theft, Identity protection, protection from account takeover fraud, and more. But, this is not a one-sided process. Both organizations and customers need to follow practices that keep them safe online. 

One of the best things that banks and other businesses can do is make sure that customers have all the necessary information to keep themselves secure. Not sharing passwords, OTPs, and using network networks are common online safety tips. 

Just by being vigilant, customers can protect their identities online. As for banks, they need to have thorough checklists and tests to make sure customers are who they claim to be. 

In this article, we’ll be going over tips that businesses can use to strengthen the ID fraud prevention strategy.

5 Tips to Make Your ID Fraud Prevention More Robust

1. Go Back to the Initial Customer Interaction Phase

Customers of today want complete security and convenience. More and more customers want a convenient online experience. The second largest group of consumers demands to be recognized during online transactions. This leads to a seamless customer experience. If you keep adding friction to the process, it can cause you to lose more customers. 

because of changing customer demands, they should be able to interact freely with the business. Letting customers do any activity they want can even lead to understanding customer behaviors. There’s no better way for you to gauge fraudsters than understand customer behaviors. 

If a business instantly recognizes who the customers are, it’ll be able to build defenses that can highlight fraudsters.

2. Understand Expectations and Capabilities of Your Customers

With the new age of modernization in the banking industry, customers from all demographics, age groups, and income brackets have increased their online activities. This is giving way to a whole range of new digital solutions and marketing techniques. 

But with increased online activities, comes an increased level of fraud risk. That’s not all, managing all customer expectations is a major challenge for businesses of all kinds. 

This leads to all new types of education and support for customers who are new to digital banking. Educating your customers is the surefire way to make them more susceptible to fraud.

3. Leverage Technology to Boost Customer Fraud Prevention

According to the latest surveys, its shown that companies that are investing in new solutions to prevent fraud are getting great results. Adopting newer technologies helps businesses stay on top of all the latest fraud trends. 

These investments are helping businesses streamline challenging processes such as:

They also help in preventing fraud by uncovering fraudulent users as soon as possible.

4. Outsource But Keep Fraud Prevention in Mind

Businesses that are scaling quickly and need to outsource to keep up with demand may be at risk of data breaches. Companies that carelessly outsource to other organizations may be at risk. Without proper due diligence, they may end up hiring companies that looking to steal sensitive data. 

While outsourcing is a valuable strategy, it can also increase the number of ID fraud and frauds in an organization. To ensure security, companies need to hire companies and conduct strict due diligence.

5. Focus More on Activities that Build Customer Trust

Organizations that establish a good trust-based relation with customers are more trusted. Goodwill follows them around which potential customers consider while onboarding. 

Customer trust can be earned in a couple of ways. But, you can include fraud prevention as well into the mix. Some common activities include:

Some reports suggest that customers want solutions that include passwords, One-Time Passwords (OTPs) sent to their registered numbers, and security questions. You can use any of the methods to ensure trust and boost productivity.

ID Fraud Prevention strategy