Fraud is escalating, with 87% of banks reporting a rise in stolen credentials. Although these attacks are now the most common, current solutions are falling short. Passwords fail to address the threats of stolen credentials. Banks need stronger defenses.
In response, 77% of all banks surveyed express interest in tap-to-authenticate metal payment cards, and 55% of fraud leaders from banks mention adopting passwordless authentication as a likely step they will take to improve authentication in the next three years. These innovations aim to enhance security while also simplifying customer interactions. The fusion of tap-to-authenticate technology with metal payment cards could redefine how financial institutions (FIs) tackle fraud prevention.
These are just some of the findings detailed in “Fraud and Authentication: How Banks Are Rethinking Security and Customer Trust,” a PYMNTS Intelligence and Arculus collaboration. This edition builds off of our previous research to examine how FIs address rising fraud and evolving customer demands. It draws on insights from a survey of 200 heads of fraud and heads of product from banks. The survey was conducted from June 16, 2024, to July 2, 2024.
Banks are dealing with an increase in authentication-based fraud
Increased fraud activity is fueling interest in authentication alternatives.
Fraud rates are rising, with 87% of banks reporting increases in stolen or falsified credentials over the past year. Stolen credentials now account for 41% of fraud, making these attacks the most frequent type reported by banks. On average, banks report two types of fraud have grown: account takeovers and fraudulent transactions.
To address these issues, banks are exploring advanced authentication tools like tap-to-authenticate metal payment cards. All told, 77% of all bank respondents express interest in adopting these cards, with 42% highly interested and 35% somewhat interested.
Larger banks and specific roles lead adoption interest.
Larger institutions drive adoption, with 69% of banks with over $100 billion in assets expressing a strong level of interest in metal cards. Add in the 23% of somewhat interested large banks, and the pool of large banks interested in metal payment cards grows to 92%.
We talked to two types of executives from banks in our research. Heads of product are somewhat more likely to show strong interest in issuing tap-to-authenticate metal payment cards than heads of fraud, at 43% and 40%, respectively. This shared interest highlights the cards’ potential attractiveness as a product and not just a security measure.
Smaller banks show mixed interest.
Smaller banks, particularly those with $1 billion to $5 billion in assets, show a lesser degree of enthusiasm than larger banks. Among the largest banks in our sample (more than $100 billion in assets), 69% are highly interested in issuing tap-to-authenticate metal payment cards. Although more than two-thirds of each group of smaller banks — those with between $1 billion and $5 billion, $5 billion and $25 billion, and $25 billion to $100 billion in assets — show some degree of interest, they are more likely to be somewhat interested and less likely to be highly interested. See Figure 1 for details.
This data highlights a clear trend: Larger institutions and product-focused leaders see tap-to-authenticate cards as a priority.
Passwords are not the answer to authentication-based fraud
Passwords create significant friction for customers and fraud departments.
While passwords are popular, they remain a challenge for banks, creating significant friction for both customers and fraud prevention teams. Seventy-one percent of fraud leaders cite difficulty remembering credentials as their top authentication challenge. These frustrations highlight the urgent need for seamless and secure alternatives.
Metal cards surpass plastic in customer and institutional preference.
Forty-one percent of banks prefer tap-to-authenticate technology on metal cards, pointing to robust interest in premium experiences. Just 25% favor plastic cards, indicating metal cards’ premium feel justifies the added expense.
Larger institutions, particularly those with assets greater than $100 billion, are the most enthusiastic about metal cards in the context of tap-to-authenticate technology. Among these institutions, 69% prefer metal cards. In contrast, smaller banks with $1 billion to $5 billion in assets lean more toward plastic (39%). For more, see Figure 2.
Banks see passwordless solutions as the future of authentication.
Passwordless authentication is a growing priority, with 55% of banks identifying passwordless logins via tap-to-authenticate metal cards as a solution they are likely to employ to improve authentication in the next three years. Larger institutions, particularly those with assets exceeding $100 billion, show the strongest interest in adopting metal cards and recognize their positive return on investment. These banks report improved customer loyalty, higher profitability and enhanced fraud mitigation as key benefits.
Job roles also align closely with overall trends. Heads of product and heads of fraud favor metal cards over plastic. These leaders find that metal cards offer improved customer experiences and can address the dual concerns of fraud prevention and build quality.
Their preference for this high-quality, durable feel also reflects banks’ efforts to modernize authentication systems while enhancing customer trust and satisfaction.
Potential solutions to authentication-based fraud are clear
Higher fraud levels are linked to greater interest in tap-to-authenticate metal cards among FIs.
FIs see clear promise in streamlining authentication methods. Tap-to-authenticate metal cards and passwordless passkeys are top solutions, with 77% of banks interested (42% of banks are highly interested in metal cards, and 35% are somewhat interested). Banks with assets exceeding $100 billion show the most enthusiasm for metal cards, with 69% expressing strong interest, as visible in Figure 1.
A metric that correlates with interest in metal cards is the current level of fraud a bank is experiencing. Our research groups banks by their shares of transactions that resulted in fraud losses for customers in the past 12 months. These groups are straightforwardly labeled: high fraud, mid-level fraud and low fraud. Looking at banks in this way surfaces insights about card materials and fraud rates.
Half of the banks we surveyed are more interested in plastic cards than metal cards. These banks experienced low levels of fraud, however. Just 16% of these plastic-preferring banks were high-fraud banks.
These trends flip for the portion of banks most interested in metal. Just 25% are low-fraud banks; 35% of metal-leaning banks fall in the high-fraud category. A trend is visible: Banks more affected by fraud tend to have a stronger interest in metal cards and anticipate better impacts from adopting the technology. In fact, PYMNTS Intelligence data analysis reveals that most banks in the high-fraud category prefer metal — 55%. By comparison, plastic cards see more limited interest among banks facing high fraud.
Banks perceive metal cards as more effective than plastic ones.
Metal cards also outperform plastic in perceived fraud reduction. PYMNTS Intelligence data finds that 41% of banks prefer metal cards for tap-to-authenticate technology, while just 25% prefer plastic for that use. The message from the market is clear. Banks experiencing higher levels of fraud recognize the added value of metal cards to mitigate risk. As institutions continue to prioritize security, metal cards stand out as a preferred solution for offering a premium user experience, reducing fraud and increasing trust.
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Methodology
“Fraud and Authentication: How Banks Are Rethinking Security and Customer Trust” is based on a survey conducted from June 16, 2024, to July 2, 2024. The report examines how FIs address rising fraud rates and adapt their authentication methods to improve security and customer trust. The survey included 200 respondents, consisting of heads of fraud and product leaders from FIs with assets exceeding $1 billion. The sample provided insights into authentication challenges, customer friction and the adoption of advanced solutions such as tap-to-authenticate metal cards and passwordless authentication. Responses were analyzed to identify trends and preferences across banks of varying sizes and fraud exposure levels.
