The new in-depth study, carried out by the national fraud authority (NFA) and the department for business, innovation and skills (BIS), categorises small businesses by their vulnerability to fraud to determine how and why they become victims.
The research, which found a quarter of small and medium sized enterprises (SMEs) surveyed had suffered at least one type of fraud or internet crime in the past year, will help develop targeted fraud prevention strategies to help businesses protect themselves and their profits and to trade online confidently.
This research builds on work led by the NFA to introduce stronger anti-fraud controls to business and disrupt and punish fraudsters.
Conducted as part of the national cyber security programme, the research recognises the importance of SMEs to the UK economy, and shows business that knowing how to use new technology and the internet securely can help protect their revenues and drive growth.
Home office minister for crime prevention Jeremy Browne said:
‘For too long online fraud has been seen as a victimless crime or simply a cost of doing business in an internet age, but left unchecked it can cost people their livelihoods.
‘That is why we are determined to combat the fraudsters and scammers who damage British businesses and prey on vulnerable customers, pushing up costs for us all.
‘Part of the solution lies in understanding the extent and nature of the problem and that’s why this research is so valuable in helping the NFA help business strengthen their response to fraud and stop them becoming victims.’
The NFA is a home office agency which works with the counter-fraud community to make fraud more difficult to commit in and against the UK.
Working with SMEs is just one part of a range of ongoing awareness and prevention activities aimed at multiple sectors under fighting fraud together – the national plan to reduce and combat fraud in the UK.
This latest research showed that almost two-thirds (63 per cent) of SMEs that had experienced fraud were concerned about becoming a victim again, but many may also be underestimating the threat with one in 10 failing to take any action after suffering an incident. Other findings include:
- experience of fraud being 11 per cent higher for those trading online;
- computer hacking being the most common crime type, with 23 per cent of SMEs responding that they had experienced it at some point in their trading history, followed by card not present fraud (19 per cent) and employee fraud (18 per cent);
- hacking also caused the greatest concern, with 55 per cent of small businesses either very or quite concerned about it. This was followed by corporate identity fraud (43 per cent);
- awareness alone does not provide enough protection for SMEs, as the majority of victims (55 per cent) were aware of the fraud type before they suffered it;
- around 12 per cent of victims reported losing more than 1 per cent of their turnover;
- after suffering fraud, only just over half (53 per cent) reported it.
The NFA and BIS have used the findings of this research to identify six distinct SME segments defined by factors such as awareness of different fraud types, perception of and actual risk, business size and use of online trading. The national small business fraud segmentation will help determine exactly how attitudes, behaviour and other business characteristics contribute to fraud and internet crime risk.
This segmentation will be used to develop activities targeting vulnerable small businesses to increase their capability to prevent fraud and enable them to fully exploit new technology to expand their business.
David Willetts, minister for universities and science, said:
‘Small and medium sized businesses are vital to the UK economy and we want to help them exploit new opportunities. That is why they are an important part of the government’s national cyber security strategy.
‘This research means we can target support at SMEs so they can fully reap the benefits of technology whilst minimising the threats, helping them grow faster and perform better.’
There is already significant support available to small businesses suffering fraud or online crime. For those who want to use the internet confidently, safely and securely the NFA runs Action Fraud, a national service for individuals and businesses to report fraud and internet crime and obtain advice on how best to protect themselves.
Get safe online is a joint initiative between the government, law enforcement and leading businesses, which provides computer users and small businesses with free, independent advice on using the internet safely.