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If there is one certainty within the retail sector – whether it is fashion, food, electronics etc. – is that trends change. What you are selling today is rarely what you’ll be selling in ten years’ time.

They may well be the same brand, with many of the same features, but there will be subtle changes; whether that is a slightly different type of blue for that best-selling top, a new ingredient added to the Bolognese sauce, or an upgraded processor for the latest laptop.

The same theory can be applied to payment’s fraud. While many of the tactics used by fraudsters will have a familiar look, they will constantly be subtly changing their direction of attack to target new vulnerabilities.

The retail sector, with its complex and extensive supply chains, is particularly vulnerable to fraudulent activities.

And successful attacks can severe consequences for retailers, including financial losses, reputational damage, and legal repercussions. Perhaps more serious in the long-run, fraudulent activities can erode customer trust and tarnish a retailer’s brand image, leading to a loss of business and market share.

Common Types of Payment Fraud in Retail Supply Chains

A chain is as strong as its weakest link, and there are many potential vulnerabilities within the chain of payments between retailers and their suppliers, from the initial order placement to the final payment settlement.

Payment fraud in retail supply chains can occur through various means, including stolen credit card information, identity theft, counterfeit payments, and collusion between dishonest insiders, exploiting vulnerabilities at different stages of the supply chain, from point-of-sale (POS) systems, to online transactions, and payment processing networks.

Common forms of payment fraud in retail supply chains include:

Account Takeover

Cybercriminals gain unauthorized access to legitimate retailer or supplier accounts to manipulate transactions and divert funds.

Invoice Fraud

Fraudsters manipulate or create false invoices, tricking retailers into making payments to unauthorized entities.

Identity Theft

Criminals steal personal or financial information from employees or customers to conduct fraudulent transactions.


Internal collusion between employees and suppliers, involving the creation of fictitious orders or inflated invoices.

8 Strategies for Preventing Payment Fraud in Retail Supply Chains

Preventing retail payment fraud requires security at every step of the supply chain

The fact that fraudsters have so many angles of attack means retailers need to have a multi-pronged, adaptable and evolving protective strategy to prevent fraud, or at least mitigate against it as much as possible and reduce losses to a minimum.

1. Secure Payment Infrastructure

Retailers should leverage a secure payment infrastructure with multi-factor authentication, encryption, and tokenization to protect sensitive data and prevent unauthorized access. These measures add an extra layer of security, making it harder for fraudsters to gain unauthorized access.

This infrastructure will require constant evolution. This includes regularly patching vulnerabilities, employing the latest encryption technologies, and utilizing advanced fraud detection tools that leverage artificial intelligence and machine learning algorithms to identify suspicious patterns.

2. Real-time Transaction Monitoring

A retailer’s payments partner needs to have fraud detection systems that utilize machine learning algorithms to analyze transaction patterns, detect anomalies, and trigger alerts in real-time, allowing for immediate action to mitigate potential fraud.

3. Supplier Verification and Risk Assessment

Conduct comprehensive supplier verification processes, including background checks, credit evaluations, and reputation assessments, to ensure the legitimacy of suppliers and reduce the risk of collusion or invoice fraud.

Conduct due diligence when onboarding suppliers, verify their legitimacy, and establish clear contractual agreements that outline security requirements and responsibilities.

4. Enhanced Due Diligence

Employ enhanced due diligence procedures, such as Know Your Customer (KYC) and Know Your Supplier (KYS) protocols, to verify the identities and legitimacy of retailers and suppliers, thereby minimizing the risk of identity theft and account takeover.

5. Education and Training

Offer educational resources and training programs to retailers to your employees, raising awareness about payment fraud risks, common tactics employed by fraudsters, and best practices for fraud prevention.

6. Collaboration and Information Sharing

Actively collaborate with industry partners, regulatory bodies, and law enforcement agencies to share information about emerging fraud trends, exchange best practices, and enhance fraud prevention efforts collectively.

7. Data Analytics and Predictive Modeling

By leveraging data analytics and predictive modeling techniques, identify patterns, trends, and potential fraud indicators to proactively prevent fraudulent activities within retail supply chains.

Using this data is the most crucial, and often overlooked, step. Strategies need to be refined and updated to match the criminal activity.

8. Having Robust Data Security Measures

Protecting sensitive customer and payment data is paramount. Retailers should employ robust data encryption techniques, restrict access to authorized personnel only, and regularly audit their data security protocols to ensure compliance with industry standards and regulations.

Moving with the trends

There aren’t many surer things in life that fraudsters will move with the times. They will constantly try to get ahead of the security systems that are trying to keep them out and will always prod and test the protective layers retailers and their payment providers put in place.

So, the first and foremost strategy for protecting your retail supply chain is to be a trendsetter.

Using sophisticated payment systems, with regulated payment networks and robust anti-fraud procedures, is a must, but it is how we evolve those systems that really matters. After all, we wouldn’t want to be caught at a party wearing a top with the slightly wrong shade of blue.

If you want to talk to the TransferMate team and learn how we can keep your retail payables and receivables safe from fraudsters, contact us here.

Money makes the world go around, and money goes around the world more today than it ever has. For global retailers, controlling that flow of money around the world, through either their supply chain or from customer payments, can be the difference between a good year and a great year, or even between surviving and thriving.

When it comes to the bottom-line, business leaders will spend a lot of their time trying to increase production efficiencies, lower costs, drum up new business and increase profit margins, but the cost of doing that business is often factored in as just that – the cost of doing business.

Currency management can be seen as outside of their control more than any of the other factors, so therefore their time is best used elsewhere. It’s only when a crisis happens (such as a currency they are holding has a sharp drop in value) that the point is driven home – managing currency and mitigating against currency risk on an ongoing basis can be a real competitive advantage.

Strategies for retailers managing FX risk

    1. Identify where your risks lie

    This is easier said than done. Retail supply chains are complex, convoluted beasts with many hidden parts. You may be buying electric saws from a manufacturer in Japan, who sources iron from China to make them. If they are hit by harmful currency fluctuations (or even political actions like tariffs) they may have to move their supply chain to source the iron from Australia, raising the prices of those goods you are buying.

    This may all happen even though you have no direct relationships with either China or Australia. Identifying those risks therefore needs a deep analysis of the supply chain. Again, easier said than done.

    CFOs, Treasury and Finance will need to collaboratively work to analyse and map out potential risks and suggest alternatives if risk or cost levels get too high. In a constantly moving economic landscape, this will be very much a dynamic and moving picture.

    You can also put in contractual safeguards to supplier agreements, such as agreed refunds if a major swing takes place, or agreements to shorten the payment period.   

    2. Identify typical variances

    There are consistent macro-economic cycles that will impact currency markets. While it’s impossible to know the exact outcome of these in each case, knowing about them and factoring them into your decision making is a way for a retailer to ride those macro-economic waves more successfully.

    Let’s focus on one that’s big in the news right now – inflation.

    Inflation can have a significant impact on the currency markets
    Inflation can have a significant impact on the currency markets

    Inflation is an economic pillar that has big impacts on the currency markets. Countries with low-inflation levels will generally have stronger currency values relative to others, as their purchasing power increases over time. Countries with high inflation will see that purchasing power eroded, and therefore their currency will weaken.

    What does this mean for retailers?

    If you’re sourcing goods in a country with high inflation levels (a common occurrence right now) those goods might go down in price relative to your own currency. Of course, all currency calculations depend on the relationship of at least two currencies, so the economic landscape of where you’re buying from is equally as important.

    Nevertheless, when you are analysing currency risks and potential places you can take advantage of fluctuations, inflation is a key consideration.

    3. Currency Hedging

    A core strategy for many retailers when it came to FX risk is to hedge currency. Hedging allows you define risk for a certain period of time. It is when you enter into a binding agreement with a supplier to buy or sell at an agreed FX rate.

    For example, a UK retailer may agree to buy ten thousand computers from a United States manufacturer over the next 2 years with the price set at 1.20 USD to 1 British Sterling. This means you can plan with certainty around the cost.

    “1,200 European and North American companies surveyed in 2018 quantified $15.61 billion in negative currency impacts in a single quarter.”

    Guide to Foreign Exchange Risk Management — And Why it Matters Right Now

    You can also be more sophisticated and agree sliding scales or a share in the risk, but the principle is the same; you’re trying to not get caught out, and even potentially gain an advantage.

    4. Be agile where you supply from

    Being agile about where you supply from can reduce FX risks significantly
    Being agile about where you supply from can reduce FX risks significantly

    We all know that many things are done today because that is the way they were done yesterday. People follow templates, and their predecessors, in every area of a business, and supply chains are no exception.

    This happens at all levels and at all business sizes.

    Most global retailers will conduct regular audits of their supply chains to look for inefficiencies and cost savings, with FX costs playing a big part in that calculation. The real trick is being able to move quickly when the answer to those calculations is to move supplier to a different territory.

    By focusing a five-year strategy on restructuring their supply chain management and bringing in a range of supply chain specialists, Unilever managed to find $14 billion in cost-saving initiatives.

    Supply chain examples: six businesses getting it right

    Setting up a banking footprint in a new territory that allows you to trade there can be tricky and time-consuming, however, so having that capability of being agile in where you source from is key.

    By utilising alternatives to traditional correspondent banks, businesses can cut that set-up time from weeks and months to days (and even minutes once they are set-up).   

    5. Utilize modern technology to execute your strategy

    Strategy is nothing without execution. With fluctuating currencies and volatile supply chains, retailers need to have the right tools to bring their strategy into the real-world.

    Modern payment rails and infrastructures mean payments happen faster, more transparently, and at lower cost than traditional correspondent networks. This allows global retailers to ensure efficiencies in their supply chain management, keep stakeholders along the chain happier, and gain more insights into how their supply chain is performing.

    Platforms that allow retailers to manage their FX movement, both in terms of how they are buying and selling but also in terms of how and where they store currencies, are another obvious route to take. This ability to easily manage currencies, and at low-cost, means retailers can gain efficiencies when buying and selling and then ‘bring profits home’ at the right moment.

    You can never eliminate FX risk, just manage it

    Global FX markets are like a seesaw, when one currency goes up or down, the consequences can only be seen in relation to the other side of the equation.

    For retailers managing FX risk in their supply chain, and trying to achieve gains where possible, a coherent and dynamic strategy has to be put in place, while also acquiring the tools to make that strategy happen. Sometimes you’ll win, sometimes you’ll lose, but the goal is to reduce uncertainty.

    Money makes the world go around – but we can choose the direction our money moves around it.

    To discuss how TransferMate can help retailers, and other businesses, manage FX risk, multiple-currency holdings and trading globally, contact the team today.


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