How to spot, stop, and protect your small business from modern payment fraud

Almost half (41%) of small businesses in the UK have fallen victim to fraud, losing, on average, nearly £4,000 per business, according to research from Visa.

While you may feel like you could spot a scam a mile off, fraudsters are becoming ever-more sophisticated, and the scams are becoming harder to detect. That’s why it’s crucial to stay alert when making business payments — whether by card or transfer.

Small business owners do not have to navigate these threats alone. To help keep your business safe, here’s our guide to spotting, stopping and protecting your small business from modern payment fraud. 

Why are small business owners particularly at risk?

Small business owners are particularly vulnerable to fraud because they often operate without dedicated compliance or cybersecurity teams, handle high volumes of invoice payments, and work under tight time pressures. Fraudsters know this and use it to their advantage. 

It’s critical that, as a small business owner, you recognise key tactics, such as invoice scams and phishing, and apply simple verification habits to safeguard your hard-earned capital.

The impact is not just financial. Visa’s research found that being a victim of fraud can knock the confidence of decision makers, impact their mental health, and cause them to second-guess the business decisions they make. 

Common small business fraud tactics

Phishing, vishing & smishing

You may already be familiar with ‘phishing’ and have no doubt received numerous fake emails, designed to trick you into sharing sensitive details. This scam has now extended to include vishing (voice phishing via phone calls) and smishing (SMS phishing).

Invoice fraud

Small business owners often handle a lot of invoice payments, which is why this scam so often works on time-poor small business owners.

Invoice fraud is when fraudsters act as one of your existing suppliers, or an agency like HMRC, and send a fake invoice or bill requesting urgent payment. They might ask you to set up a new bank payment or to change your existing details.

Business email compromise 

Business email compromise (BEC) is when a fraudster gains access to a supplier or client's email account, poses as a trusted contact and deceives you into transferring funds into a fraudulent bank account or sharing sensitive information.

While phishing emails can be laughably bad, BEC attacks are highly sophisticated, often hacking real accounts to send convincing requests. Additionally, as the emails often only contain text, and no suspicious links, they often bypass built-in security filters.      

Purchase scams

Scammers are using social media and websites to advertise non-existent goods. The ads themselves, as well as the website it takes you to, are usually surprisingly credible, making it easy for people to buy without much thought. 

Social media is built on trust. Often the fake advert may have been liked or shared by someone you know who also didn’t realise it was fake. Many people think that if something has been advertised through social media, it must be legit. This is not the case. You must be cautious.

Think: Stop, Challenge, Protect

Led by UK Finance, the Take Five to Stop Fraud campaign recommends three simple steps to protect yourself and your business from falling victim to financial fraud: Stop, Challenge, Protect.

• Stop - Take a moment before sending money or sharing information.

• Challenge - Ask yourself whether this could be fake. Never be afraid to challenge a request, if it’s genuine no one will mind. Scammers will try to confuse or rush you. 

• Protect - If you suspect fraudulent activity, act fast by contacting your payment provider immediately and reporting it to Action Fraud.

How to protect your small business from fraud

Often with scams, the warning signs are there. But when people are busy, caught off-guard or put under pressure, it can be difficult to think clearly. That’s what fraudsters bank on. 

• When making a payment, always double-check bank details directly with the company by phone or in person, and only use publicly available phone numbers, like the one listed on their official website.

• If you’re ever told to ignore a Confirmation of Payee (CoP) warning, that’s a major red flag. Fraudsters often say things like “it’s just a glitch” or “our account name hasn’t updated yet” — but CoP is there to protect you. A mismatch means the name doesn’t match the account, and proceeding could mean you’re sending money straight to a scammer.

• Before buying, especially from a new or unfamiliar website or on social media, research the seller online. You should be able to find reviews or feedback. Beware of sites that have little to no online presence. If something feels off about a website or seller, trust your instincts and shop elsewhere.

• If you receive an unexpected invoice or bill from an existing supplier requesting payment to a different bank account for the first time, contact the company directly using known contact information. Avoid using the contact details straight from the invoice or bill.

• Never share sensitive information, such as passwords or PIN numbers Payment providers never ask for sensitive details.

• Fraudsters will often pressure you. Don’t feel rushed into making a payment. If you’re ever concerned about a request for money or information, take some time to think it through. Carry out checks to make sure it’s genuine.

• Contact your payment provider straightaway if you think you’ve been a victim of a scam. You can call our Operations team on 0203 308 9693. Our operating hours are Monday to Thursday 9am to 6pm and Friday 9am to 4:30pm.

Backing small business to win

At Funding Circle, we support the UK’s small businesses with more than just finance - we empower SMEs with the knowledge and tools they need to stay safe. 

We have a range of products, designed exclusively for small businesses, from term loans to FlexiPay, our flexible line of credit. Find out which is right for your business and apply online in minutes.

12/10/26: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.