The world is our classroom, and when it comes to fraud, there’s no shortage of real-life learning scenarios in banking.
- Nearly every American’s Social Security number (SSN) and personal information has likely been leaked in a massive data breach.
- AI is making phishing schemes almost impossible to spot.
- More than half of Americans have fallen victim to payment app fraud.
- Magnetic stripe fallback is complicating point-of-sale transaction fraud, making it harder to detect and prevent.
Credit card fraud and malicious data breaches are rampant. If you’re ready to lead the way in fraud-fighting tactics for your institution and its accountholders, keep reading.
Fraud Predictions for 2025
Fraudsters aren’t following the rulebook, but our risk experts have made some predictions about schemes to watch for:
- Hard-to-spot, hyper-realistic phishing scams via Venmo, PayPal, Zelle, and other payment apps
- Credential stuffing targeting digital banking (including fintech platforms)
- Magnetic stripe fallback card fraud
These trends highlight important lessons for the banking industry. Credit union and bank leaders across the nation are asking, “How can we halt fraud in its tracks?”
Lesson #1: Fraud is Expensive
Fraud costs institutions approximately 5% of annual revenue. Besides the initial loss, the cost of remediating fraud is significant. For every $1 lost to fraud, we estimate it costs financial institutions $4.00 to remediate. This line item is shifting from a “cost of doing business” mindset to asking, “What would it cost us if we don’t prevent losses in the first place?”
Credit and debit card fraud lead to huge losses for both institutions and accountholders. To cut down on these losses, ensure that your card processing system operates on 3D Secure 2.0 to protect charge-back rights. Be proactive by authenticating new accountholders and setting parameters on when they can access funds. Also, set daily dollar limits on debit card transactions. If card fraud is a recurring issue, consider investing in real-time fraud monitoring tools to intercept fraud from the start. A proactive approach is a cost-saving approach.
Lesson #2: AI is Accelerating Phishing Attacks
Each year, the NCUA outlines key cybersecurity threats for financial institutions. This year, they highlighted AI-enabled attacks as an emerging threat.
With generative AI, fraudsters can now bypass the telltale signs of phishing—suspicious language, odd tone, and typos. AI-powered deepfake messages (both voice and text) have become increasingly convincing.
How can institutions combat credential stuffing and phishing attacks? Aside from encouraging accountholders to safeguard their information, set strong, multi-factor authentication (MFA) requirements for online banking.
Lesson #3: Biometrics Are a More Secure Form of Authentication
Employee fraud, check fraud, and account takeover fraud are becoming more prevalent. Fraudsters are getting more clever, their attacks more complex, and they’re finding ways around traditional authentication. Biometrics, which leverage unique, non-duplicatable traits, offer a dynamic form of authentication that is nearly impossible to manipulate or duplicate.
With the right controls and biometrics in place, these types of fraud can be drastically reduced. Enable multi-factor, biometric authentication for employee access, and encourage accountholders to use biometric options like fingerprint, facial recognition, or voice ID whenever possible.
Wondering what controls are right for your institution? Ask one of our risk experts by filling out this form.
Lesson #4: Safeguarding Credentials is More Critical Than Ever
Who shoulders the burden of fraud losses? It’s a shared impact: financial institutions, businesses, and individuals all suffer.
Having robust controls in place and encouraging accountholders to safeguard their information is the most critical step in proactively combating fraud.
As more online merchants follow in Amazon’s footsteps by offering payment app integrations, these apps (like Zelle and Venmo) account for significant losses. Each integration opens potential fraud doors. Caution accountholders about the trade-off between security and convenience. Encourage them to keep payments limited to friends and family—no strangers, no e-commerce.
Each quarter, Allied’s risk experts provide a 90-day review and deep dive into recent fraud activity — plus insights on how to predict and prevent future attacks in the Let’s Talk Fraud Webinar. Register for upcoming Let’s Talk Fraud to stay up to date!