CreditorWatch founder and serial Aussie entrepreneur Colin Porter has raised $3 million for the launch of his newest fintech venture, designed to prevent small businesses from falling victim to invoice fraud.
PayOK is a Software-as-a-Service platform allowing customers to quickly verify that the name on an invoice matches the account number, ensuring they know they’re paying the right person.
The startup is intended to prevent business email compromise (BEC), or redirection scams, in which cybercriminals alter business account details, causing payments to be made to the wrong person.
In the 12 months to July 2021, more than 3300 incidents of BEC were reported to the Australian Federal Police, with financial losses totalling more than $79 million.
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That said, there are no reporting obligations when something like this does occur, Porter tells SmartCompany, and it’s often an embarrassment to the company involved.
That means the true scale of the problem is largely unknown.
The impact of these scams can be dire for businesses. In November last year, Sydney hedge fund Levitas Capital collapsed after mistakenly making $8.7 million in fraudulent payments — a blunder that led its largest institutional client to withdraw its funds.
Every business faces the risk of this kind of fraud, Porter says.
“Payment fraud is on the rise,” he adds.
“It can collapse a business or significantly impact them.”
PayOK’s global goals
The oversubscribed round was led by Nightingale Partners. As PayOK operates in a highly regulated environment, much of the funding will go towards ensuring secure systems and robust data protection.
The majority however, is pegged for marketing, product development and customer acquisition, he says.
Beyond that, Porter is focused on fast growth. While he grew CreditorWatch slowly and organically, this time around he’s focusing on investment and fast growth.
This is not a problem that exists only in Australia, he notes.
“This is a global play.”
A fraud “insurance product” for SMEs
The launch comes shortly after Porter also founded Avenue Bank, which was recently granted its restricted Authorised Deposit-Taking Institution (ADI) licence.
It was through founding the bank and working with his team of bankers that Porter became aware of the scale of the invoice fraud challenge for businesses.
Banks are generally unable to match up account names and numbers when payments are being processed, he explains. And once a payment has been made to the wrong account, the banks are not liable to retrieve it.
The big banks are working with legacy systems, he explains, and this type of fraud is frankly not a priority for them.
There was a need for a solution here, and Porter set out to fill it.
There are also similarities between PayOK and CreditorWatch, he explains. Both are targeted to the small business audience, but where CreditorWatch focuses on credit risk, PayOK is all about vendor risk.
PayOK is “almost an insurance product”, he explains. There’s a high chance businesses will be targeted with scams like this.
“How much damage is it going to cause when it does happen?”