68% of Banks Turn to AI as Fraud Outpaces Rule-Based Systems

Unauthorized-party fraud has reclaimed center stage, reversing last year’s pattern and reshaping how banks think about risk.

That is the core shift in the “2025 State of Fraud and Financial Crime in the United States” report, produced by PYMNTS Intelligence in collaboration with Block. Based on a survey of 200 executives at U.S. financial institutions, the report finds that fraud is not only becoming more sophisticated but also more concentrated in credential theft and account takeovers.

At the same time, institutions are investing more aggressively in artificial intelligence (AI), behavioral analytics and cloud infrastructure to keep pace.

Fraud losses remain contained at the industry level, but the pressure is uneven and growing, particularly for large banks and digital-first players.

Key data points from the report illustrate how the landscape has shifted:

71% of total fraud incidents and dollar losses now stem from unauthorized-party schemes, up sharply from 48% last year.

Average fraud loss rates rose to 0.8 basis points, with large banks reporting losses above 3.5 basis points, more than four times the survey average.

68% of financial institutions increased fraud-detection spending year over year, while 46% report rising sophistication in fraud schemes.

The resurgence of unauthorized access reflects a broader evolution in tactics. Fraudsters are exploiting credentials, manipulating payment information and targeting faster payment rails. As shown in the report’s breakdown of fraud types, digital payment fraud and compromised credentials account for a growing share of both transaction volume and dollar value. This is not static crime. It adapts. Institutions respond. The cycle repeats.

Yet the impact extends beyond balance sheets.

The data indicate that half of financial institutions say fraud has damaged customer loyalty. Forty-four percent cite harm to brand and reputation. Nearly as many report lost business opportunities. Fraud is now a growth issue as much as a risk issue.

Technology is moving from optional to essential. Machine learning and behavioral analytics are becoming foundational tools. Seventy percent of institutions say AI enables them to blend proactive and reactive defenses.

Roughly eight in 10 FinTechs and large banks report implementing advanced behavioral analytics. Still, about one in five institutions, especially smaller and regional banks, operate without these capabilities. That gap is widening.

Institutions also face overlapping pressures. Forty-seven percent cite regulatory compliance challenges. Forty-one percent point to faster or more diverse payment types. Nearly half say fraud sophistication itself is increasing. The result is a complex operating environment where compliance, modernization and fraud defense must move in tandem.

Looking ahead, investment plans signal continued momentum. Half of institutions plan to expand their use of cloud-based fraud platforms. Fifty-one percent expect to increase outsourcing. Forty percent are investing in deep learning systems. Fraud prevention is becoming multilayered and collaborative.

The report’s conclusion is clear. Fraud will continue to evolve as quickly as the systems designed to stop it. Institutions that combine predictive analytics, real-time data and human oversight will be best positioned to sustain trust in an increasingly digital economy.

Fraud is no longer just a cost of doing business. It is a test of resilience.

At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.