Risks in invoice finance: an interview with Pulse Cashflow

When it comes to fraud, financial crime and credit risk, invoice finance providers have some unique challenges. That’s why we asked Terry Bond (Risk Director @ Pulse Cashflow) how technology like Honey Badger can play a role in protecting against bad actors. We also asked about his recent collaboration with Honey Badger to recommend and implement new risk insights based on his 15+ years of experience.

Question: Can you describe your first impression when you encountered the Honey Badger platform? What specific features or aspects initially caught your attention?

Terry’s Answer: “My initial encounter with the Honey Badger platform was highly positive. A standout feature was its simplicity, offering an intuitive interface that made navigation a breeze. The design and data entry points were user-friendly, ensuring easy input of information. What also impressed me was the rapid and clear display of results, enabling swift and informed decision-making. This combination of intuitive design and efficiency highlighted its potential value for our operations at Pulse Cashflow.”

Question: How did Honey Badger’s approach to risk insights differ from other tools or platforms you’ve used in the past?

Terry’s Answer: “Honey Badger stood out from other tools we’ve used in the past. They listened to our feedback and brought in fresh data sources and designed new risk rules specifically for us. They recognised that our business had a need for some unique risk insights, not a one-size-fits-all solution. The end product was a platform that could seamlessly perform the exact checks we used to do by hand, but now more efficiently and accurately.”

Question: Could you walk us through the manual risk insight checks you were conducting prior to engaging with Honey Badger?

Terry’s Answer: “Previously we ran a bunch of manual checks like reviewing Companies House entries, searching email addresses, running telephone number checks, and conducting website reviews. Some checks consisted of quite detailed investigation that involved looking into the history of a company and analysing data over many years. Honey Badger automated these processes, which used to be time-consuming and labour-intensive. Now all checks are integrated into their risk engine, streamlining our workflow significantly.”

Question: What new risk insights did you recommend to Honey Badger based on your experience?

Terry’s Answer: “It’s vital to approach this answer with a bit of caution. In the world of fraud prevention, one of the golden rules is to never fully disclose your investigation methods.

However, I can share some information on the recommendations we made without going into too much detail. In the past we’ve observed certain patterns of behaviour on Companies House that are commonly associated with fraudulent businesses. These patterns are subtle but telling – certain irregularities in filings, inconsistencies in company details, and other red flags that might not be apparent to the untrained eye. We shared these insights with Honey Badger, suggesting ways they could integrate this understanding into their platform. The idea was to help them develop algorithms that could automatically detect these patterns, thus enhancing the platform’s ability to pre-empt potential fraud. This collaboration was about combining our practical experience with their technological prowess to create a more robust, proactive fraud detection system.”

Question: Can you share any examples of how Honey Badger was able to quickly integrate your suggestions into their platform?

Terry’s Answer: “One key aspect was our request for them to flag companies that filed financials earlier than expected or had changes in their accounting periods. We’ve found that such occurrences can sometimes be red flags, indicating a need for deeper investigation. Honey Badger quickly added this feature, enhancing their platform’s capability to alert us to potential risks promptly. This type of check is typically quite time consuming, especially for businesses that have been around for a while, so it’s great to now get these insights in just a few seconds.”

Question: How do you intend to use the new risk insights added to Honey Badger’s platform to help you on a day-to-day basis?

Terry’s Answer: “By automating these processes, we’re not only saving significant time and resources but also enhancing our ability to combat fraud effectively. The platform allows us to identify potential risks faster and more accurately, enabling us to take proactive measures. This level of efficiency is crucial in our ongoing efforts to stay ahead in the fight against financial fraud. Going forward we’ll run all new businesses applying for invoice finance through Honey Badger.”

Question: In your view, what are the biggest risks currently facing invoice finance providers?

Terry’s Answer: “The biggest risks for invoice finance providers right now are undoubtedly centered around the increasing levels of fraud. Last year alone£1.2 billion was lost to fraud according to UK Finance. What makes it more challenging is the increasing sophistication of these fraudsters. They are constantly evolving their methods, often employing advanced technologies like AI, making fraud harder to detect and prevent.

During times of economic instability, like the one we are currently experiencing, there’s a noticeable uptick in fraud attempts. This isn’t just a random occurrence – it’s a calculated move by fraudsters as they try to exploit the vulnerabilities that often arise during such periods. It becomes increasingly important for providers like us to be equipped with the right tools and insights to mitigate this risk effectively.

In this context, technology plays a crucial role. We need systems that are not just reactive but proactive in identifying potentially fraudulent activities. This means automation, machine learning, and generative AI to stay ahead of the curve. These technologies can analyse patterns, detect anomalies, and raise red flags much quicker than traditional methods. It’s about being one step ahead in a constantly evolving landscape.”

Question: How do you see technologies like Honey Badger evolving to meet these challenges?

Terry’s Answer: “It isn’t just about providing a one-size-fits-all tool but about understanding and being able to adapt to the specific challenges different businesses face.

What sets Honey Badger apart is its evolution into an aggregator and orchestrator of a vast array of data sources. This capability is invaluable for businesses like ours, giving us access to thousands of different risk insights through a single provider. It’s this aggregation that enables us to have a comprehensive overview of potential risks from numerous angles.

Furthermore, Honey Badger’s incorporation of generative AI into their platform is exciting. Traditionally AI was used to find patterns or anomalies in data. They’re now using it to extract information and investigate areas that were previously unreachable, such as website content, customer reviews, and other alternative data sources. These areas were often too complex or time-consuming for us to analyse effectively in the past.”

Question: Lastly, what advice would you give to other risk directors in the invoice finance industry regarding the adoption of technology like Honey Badger?

Terry’s Answer: “Staying vigilant is key in our industry, especially with the growing and evolving risks of client and debtor fraud. I strongly advise other risk directors in the invoice finance sector to consider adopting technology solutions like Honey Badger. These tools are not just about automation; they’re about intelligence and efficiency. Honey Badger has significantly streamlined our onboarding process. It automates the initial screening, enabling us to quickly identify and focus on high-risk cases that require deeper investigation. This targeted approach ensures that our resources are used effectively and that we remain one step ahead in mitigating risks.”