Credit Unions Tap New Tech to Tackle Rising Security Threats

CUs face surging fraud, including check scams and data breaches, costing millions. High-profile incidents highlight the impact, with 79% of CUs reporting substantial losses and many experiencing sharp rises in scam incidents.

CUs are prioritizing innovative anti-fraud technologies, with 43% citing fraud mitigation as a top investment area. New solutions enhance security, addressing rising fraud and aligning with members’ growing demand for safety-focused innovations.

CUs are increasingly leveraging partnerships to enhance security and fight fraud. With 42% prioritizing fraud reduction when collaborating with FinTechs, these partnerships are key to meeting member expectations and advancing innovation.

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Fraud is becoming a costly and pervasive challenge for credit unions (CUs), eating into revenues. From check scams to cyber breaches, these attacks represent a growing issue, at times amplified by fraudsters sharing tactics online. The financial and reputational fallout is severe, with some CUs facing member dissatisfaction and widespread losses.

Now, many institutions are prioritizing investment in advanced fraud-fighting technologies and looking to external partnerships to bolster defenses. With fraudsters continually adapting their tactics, CUs face an urgent need to enhance security and reinforce trust to protect their communities and futures.

Fraud Increasingly Affects CUs’ Revenues and Member Bases
CUs Are Investing in Innovative Anti-Fraud Technologies
CUs Are Turning to Partnerships to Tackle Security Challenges
Implement Modern Fraud Prevention Strategies to Combat Rising Threats

Fraud Increasingly Affects CUs’ Revenues and Member Bases

Check scams are surging as fraudsters share tips online.

Banks, CUs and brokerages are seeing a rise in check fraud, as scammers share tactics on social media. These attacks exploit the gap between when financial institutions (FIs) make customers’ funds from checks available and when check verification is complete.

Check fraud and scams — including forgery, kiting, physical theft, counterfeiting and overpayments — cost FIs hundreds of millions of dollars. Between February and August 2023, 44% of checks stolen from the mail were altered and deposited.

33%

of CUs said scam instances skyrocketed by 50%-100% in the last year.

CUs are seeing widespread, growing incidents of fraud.

As fraud persists, more CUs are at risk. In fact, 79% of CUs and community banks saw direct fraud losses of more than $500,000 between late 2022 and late 2023. This share is larger than any other banking segment. Moreover, in mid-2024, 33% of CUs said scam cases had skyrocketed by 50%-100% in the previous year.

CUs Are Investing in Innovative Anti-Fraud Technologies

Innovative solutions are emerging to help CUs fight attacks.

43%

of CUs prioritize fraud detection and mitigation among their top three technology investment areas.

Amid mounting fraud, CUs seek up-to-date, effective tools. Solutions providers are meeting that demand with new capabilities. Velera, for instance, introduced a solution that allows CU members to navigate the cards they have on file with various merchants and providers, enabling them to more easily view and update credentials. The technology combats first-party fraud while simplifying members’ expense management.

CUs are turning their focus toward combating fraud.

Specifically, 43% of CUs report that fraud detection/mitigation ranks among their top three technology investment priorities for 2024 and 2025.

Members, too, are focused on security. In fact, 27% of CU members say features and capabilities related to security and trust are the area in which they would most like their credit union to innovate in the next three years. This percentage is higher than for any other type of feature or capability.

CUs Are Turning to Partnerships to Tackle Security Challenges

Solidarity Community Federal Credit Union teams up with Mahalo Banking to meet demand for greater security.

CUs are turning to partnerships to fight fraud. Solidarity Community Federal Credit Union (Solidarity CFCU), for instance, recently announced a collaboration with Mahalo Banking to boost digital security. Through this partnership, the Kokomo, Indiana-based CU aims to use Mahalo’s Credential Assurance Technology to provide advanced protection and accessibility. This digital banking solution could help Solidarity CFCU keep up with evolving security demands and member expectations.

42%

of CU executives say reducing fraud losses is a top objective when partnering with FinTechs.

The mandate to fight fraud is informing CUs’ partnership strategies.

In 2024, 42% of CU executives listed reducing fraud losses as a top objective when partnering with FinTechs. This share was up significantly from 28% in 2023.

Overall, CUs view external partnerships as key to their innovation strategy. Ninety-nine percent of credit unions with less than $1 billion in assets say partnerships are important to payment innovation.

Implement Modern Fraud Prevention Strategies to Combat Rising Threats

As fraud tactics continue to evolve, CUs must act decisively to protect their financial stability and member trust. Implementing modern fraud prevention strategies is essential for mitigating risks and safeguarding resources. Invest in innovative security solutions and form strategic partnerships with FinTechs. These enable CUs to stay ahead of evolving threats and ensure a safer environment for members.

Prioritize fraud detection and mitigation technologies. Invest in tools that monitor transactions in real time and identify suspicious behavior.
Form partnerships with trusted FinTechs. Collaborate with technology providers to enhance digital security and leverage advanced fraud prevention capabilities.
Implement multilayered security systems. Use advanced technologies to safeguard member data across all digital platforms.
Educate members on security best practices. Empower members to recognize scams and secure their accounts.
Adopt a proactive fraud response strategy. Develop protocols for swift action when fraud is detected to minimize losses and restore trust quickly.

CUs must evolve their approach to fraud prevention by embracing technological innovations and strengthening relationships with external partners. These efforts will not only protect their assets but also foster lasting member trust, positioning credit unions for success in an increasingly fraud-prone landscape. By adopting these strategies, CUs can enhance their resilience against fraud and better meet member needs.

The global fraud environment is dynamic and rapidly evolving. Today’s landscape, now featuring data mining, AI and robotics, looks very different from just a few years ago. The adoption of advanced technology and automation has accelerated as credit unions strive to protect against increasingly sophisticated fraudsters. While many credit unions’ current fraud prevention tools stop a significant amount of fraud, they often risk member disruption or additional losses. To combat today’s rising threats, partnering with a FinTech solutions provider such as Velera can offer credit unions access to secure, omnichannel fraud prevention powered by vast data, enhancing the member experience rather than disrupting it.”

Karen Postma
SVP, Risk Solutions

About

Velera, formerly PSCU/Co-op Solutions, is the nation’s premier payments credit union service organization (CUSO) and an integrated financial technology solutions provider. With over four decades of industry experience and a commitment to service excellence and innovation, the company serves more than 4,000 financial institutions throughout North America, operating with velocity to help its clients keep pace with the rapid momentum of change and fuel growth in the new era of financial services. Velera leverages its expertise and resources on behalf of credit unions and their members, offering an end-to-end product portfolio that includes payment processing, fraud and risk management, data and analytics, digital banking, instant payments, strategic consulting, collections, ATM and POS networks, shared branching and 24/7/365 member support via its contact centers. For more information, visit velera.com.

PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multilingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.

The PYMNTS Intelligence team that produced this Tracker:

Chief Content Officer: John Gaffney
Writer: Carson Olshansky
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Research Analyst: Mariano Soler

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Scam Surge: How Credit Unions Are Tackling Rising Security Threats