More and more Canadian small businesses are being hit by fraud, with half (50 per cent) of them experiencing either attempted or successful fraud in the past 12 months, and more than one-third (36 per cent) of those who fell victim to fraud suffering financial losses, according to new data by the Canadian Federation of Independent Business (CFIB) released in collaboration with Interac Corp. (Interac).
The report said impacted business owners have lost $7,800 on average in the past year. Beyond financial losses, small businesses dealt with lost time (76 per cent), negative emotional impact (51 per cent), and decreased staff morale (23 per cent).
“Whether you’re a consumer, a mom-and-pop shop or a big industry player, we’ve all been impacted by fraud in some shape or form. Dealing with their consequences can be frustrating and time-consuming, especially for small business owners who often don’t have enough time or resources to address this growing issue,” said Corinne Pohlmann, Executive Vice-President of Advocacy at CFIB.
“Fraud is here to stay, and unfortunately, the rise in various AI tools is only exacerbating the issue. While October marks Cybersecurity Awareness Month in Canada, it’s important to stay vigilant year-round.”
In a news release, the CFIB said the bigger the business, the likelier it is to experience fraud attempts.
“The most common types of fraud attempts include email scams and phishing (85 per cent), text (77 per cent) and phone call scams (76 per cent). Though less common, fraudulent payments and chargebacks (when a customer falsely disputes legitimate transactions) are more likely to result in business losses, for 19 per cent and 16 per cent of businesses respectively. Businesses in the hospitality, retail, transportation, personal services, and arts, recreation and information sectors were found to be particularly vulnerable to these two types of fraud,” explained the CFIB.
It said nine in 10 (90 per cent) business owners are also worried that the rise in the use of artificial intelligence (AI) will make fraud more sophisticated and harder to detect.
“This research drives home how important it is for the ecosystem to prioritize fraud prevention and detection. We are investing in solutions that help business owners stay ahead of an ever-evolving fraud landscape so their focus can remain on operational growth and customer trust,” said Joanna Schoneveld, Fraud Management Leader at Interac.
CFIB’s recommendations to governments include:
- Enhancing the Code of Conduct for the Payment Card Industry in Canada ensuring accountability to merchants through a fair, transparent and competitive payment landscape in Canada. This includes implementing improvements to complaint handling processes for merchants, such as the process of challenging chargebacks.
- Making sure resources are allocated adequately to “cyber policing” and reporting yearly outcomes with specific numbers for small businesses.
- Providing small businesses with financial assistance (such as tax credits, low-interest loans or grants) to help them invest in IT security.
- Proactively sharing information on existing resources and best practices with businesses and associations.
- Providing advice specifically tailored to small and medium-sized enterprises (SME) on preventing cyberattacks.
To combat fraud, half of businesses have implemented stricter verification processes for payments, such as multi-factor authentication for online transactions, while nearly four in 10 (36 per cent) increased cybersecurity investments and one-third (32 per cent) enhanced employee training, added the CFIB.
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