Digital illusion: How the UK’s paper-based processes fuel cyber attacks
Thousands of UK SMEs are operating with outdated, paper-based verification processes that expose them to cyber attacks, fraud, hinder growth, and erode confidence.
A new report from regtech firm Umazi called for an urgent overhaul of the UK’s corporate identity infrastructure, warning that legacy verification systems have become a weak link in Britain’s digital economy.
“The irony is painful”, said Umazi chief executive Cindy van Niekerk. “While we talk about fintech and AI leadership, the average SME is still sending scanned passports and PDFs to prove they exist. This isn’t a digital economy – it’s a digital illusion”.
Cyber attacks on the rise
The report found that 70 per cent of SMEs fear their business identity could be stolen – an increasingly plausible risk as cybercriminals adopt AI-powered tactics like deepfakes and synthetic credentials.
Van Niekerk argues that without modern digital verification, small firms are left with “manual, fragmented” checks that not only fail to stop bad actors but also throttle legitimate business with delays and duplication.
Unlike large corporations with legal teams and brand equity, SMEs are far more vulnerable to impersonation and fraud, yet bear the brunt of antiquated processes.
Regulatory blindspot
The warning comes as scrutiny intensifies around the UK’s broader cyber resilience.
M&S chair Archie Norman revealed to parliament this week that two major British firms had suffered ransomware attacks recently – neither of which had been disclosed.
Norman backed mandatory reporting of cyber breaches, calling it a ‘very interesting idea’ that could help close systemic gaps.
“We have reason to believe there have been major cyber-attacks on large British companies in the last four months that have unreported”, he told MPs.
Umazi argued that a fragmented and inconsistent approach to digital identity not only risks fraud but also slows the broader flow of capital and trust in the system.
A call for action
Umazi is calling on regulators to support a single, reusable digital identity for businesses, which would allow firms to prove their legitimacy once.
“SMEs need more than a lip service”, said van Niekerk. “They need legislation, real-time verification tools, and regulatory momentum. We don’t need another white paper, we need political courage.”
Failure to act, she warned, could cost the UK economy millions in lost growth, delayed funding, and diminished international competitiveness.
“From retail to education, from health to hospitality – SMEs are the backbone of Britain’s economy”, she added. “But we’re still treating them like second-class citizens when it comes to identity”.