Fraud in the financial sector has reached unprecedented levels, with 2024 marking another year of rising fraud attacks across banks, credit unions and fintechs.
According to Alloy’s latest State of Fraud Report, financial criminals and organised fraud rings were responsible for 71% of fraud attacks, shifting industry perspectives on how financial institutions should combat fraud.
With direct losses surpassing $1 million for nearly a third of organisations, financial decision-makers are intensifying their focus on AI-driven fraud prevention, identity risk solutions and regulatory compliance measures.
Organised Crime Driving Fraud Growth
The latest State of Fraud Report confirms that fraud is no longer primarily driven by individuals committing first-party fraud.
Instead, organised crime rings are the dominant force behind financial fraud, utilising sophisticated technology, stolen data and social engineering tactics to exploit vulnerabilities in digital banking systems.
This shift in fraud attribution marks a significant change from previous years when fraud prevention efforts largely focused on individual bad actors.
The US financial system has particularly suffered from large-scale fraud stemming from the Paycheck Protection Program (PPP) and unemployment benefits fraud during the COVID-19 pandemic.
The total estimated losses from these schemes have now reached $255 billion, far exceeding initial government estimates.
These fraudulent funds have strengthened criminal organisations, allowing them to orchestrate more sophisticated attacks on financial institutions.
The Increasing Cost of Fraud
Fraud continues to be a costly burden on financial institutions.
Over 60% of financial organisations reported an increase in fraud attacks in 2024, with 31% experiencing more than $1 million in direct fraud losses.
Beyond financial damage, reputational harm remains a key concern for banks and fintechs.
73% of respondents cited reputational damage as the most severe consequence of fraud, highlighting the critical need for trust and security in financial services.
The fraud threat is particularly severe for enterprise banks, which saw the highest growth in fraud attacks, with nearly 70% reporting an increase.
Meanwhile, mid-market banks and credit unions experienced the highest proportion of fraud cases exceeding $5 million, indicating that fraud prevention strategies must be tailored to the specific vulnerabilities of different financial institutions.
AI: The Double-Edged Sword of Fraud Prevention
AI has become a crucial tool in the fight against fraud, but it has also empowered bad actors to launch more advanced attacks.
Fraudsters are leveraging generative AI for deepfake scams, AI-driven phishing attempts and large-scale credential stuffing.
As a result, 93% of financial organisations believe AI and machine learning will revolutionise fraud detection.
However, expectations for AI are becoming more realistic.
Instead of relying on standalone AI tools, financial institutions are shifting toward platforms that centralise identity and fraud risk.
These platforms use AI to analyse vast amounts of transaction and behavioural data, allowing fraud teams to detect anomalies in real time and prevent attacks before they occur.
Key Areas of Fraud Growth
The State of Fraud Report identified several areas where fraud is increasing:
- Digital Banking Fraud: 80% of fraud events occurred in online and mobile banking channels, making digital fraud prevention a top priority.
- Account Takeover (ATO) Attacks: Fraudsters are increasingly using stolen credentials to gain unauthorised access to user accounts.
- Credit Card Fraud & Identity Theft: These remain the most common fraud types, alongside growing threats such as check fraud and authorized push payment (APP) scams.
- Check Fraud in Enterprise Banks: Despite digital transformation, 20% of enterprise banks reported check fraud as their top fraud type.
Investment in Fraud Prevention
With fraud losses mounting, 93% of financial institutions plan to increase investments in fraud prevention in 2025. The most popular investment areas include:
- Identity Risk Solutions (64%) – Implementing advanced identity verification technologies to prevent fraud at the onboarding stage.
- AI and Machine Learning (35%) – Leveraging AI to analyse fraud patterns and detect suspicious activities in real time.
- Biometric Authentication (38%) – Increasing use of voice, facial, and fingerprint recognition to enhance security.
- Real-time Fraud Interdiction (50%) – Stopping fraud as transactions occur rather than after losses are incurred.
Additionally, 62% of financial organisations are increasing fraud prevention investments due to regulatory scrutiny, particularly in response to new compliance expectations for reimbursements in fraud cases.
Regulatory Pressure and the Future of Fraud Prevention
Regulators are closely monitoring financial fraud trends, leading to increased compliance obligations for banks and fintechs.
In 2025, the industry expects a continued push for stronger fraud prevention measures, including new requirements for identity verification, transaction monitoring and customer education programs.
Financial institutions that proactively adopt AI-driven fraud prevention strategies and enhance identity verification processes will be best positioned to navigate regulatory pressures while protecting their customers from evolving fraud threats.
The 2025 State of Fraud Report underscores that financial institutions must remain vigilant in the face of rising fraud risks.
As organised crime groups exploit new technologies, banks, credit unions and fintechs must evolve their fraud prevention strategies to stay ahead.
By investing in AI, identity risk solutions and real-time transaction monitoring, financial institutions can mitigate fraud losses, protect their reputations and maintain consumer trust in an increasingly digital financial ecosystem.
The post The state of fraud in 2025: Organised crime leads the way appeared first on Payments Cards & Mobile.
