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Artificial intelligence is rendering traditional digital identity verification toothless.

The next wave of AI-powered cyberattacks are already here, and they’re arriving with synthetic faces, voices, devices and behavioral signals that can mimic legitimate users down to keystroke cadence and device posture.

“When you can do fake face, voice and normal behavior in one motion, it tests the processes and can expose gaps in many organizations’ defenses,” Zac Cohen, chief product officer at Trulioo, told PYMNTS during a discussion for the March edition of the “What’s Next In Payments” series, “How Will AI Change Identity?”

“Point solutions will always fail against a multidimensional attack,” Cohen said.

And in the escalating contest between AI-powered fraudsters and the companies trying to stop them, that’s why it is the baseline that has become everything.

“Fraud will look to exploit the gaps between onboarding, login and transaction monitoring,” Cohen said.

The biggest change companies can make, he added, is shifting from point-in-time verification to continuous, contextual trust; a baseline built atop identity systems that connect signals over time and across teams.

Rise of Multidimensional AI Attacks

Over the past year, identity systems have faced a surge in AI-powered attacks. Attackers are now using automated bots and AI agents that can adapt in real time to probe for weaknesses across voice systems, login flows and behavioral checks.

“The biggest piece is the expanded scope and scale,” Cohen explained. “We’re seeing a lot of automated bots and agents that are infiltrating a wider range of identity processes, whether that’s voice spoofing or otherwise.”

Asked whether fake faces, fake voices or fake “normal” behavior pose the biggest threat, Cohen didn’t hesitate. “It’s funny, I don’t really worry about one more than the other,” he said. “What I worry about is really the ability to use them in concert together.”

Today’s danger is not a deepfaked selfie or a cloned voice in isolation but the synchronized deployment of synthetic signals across multiple checkpoints in a single flow. This reality poses a problem for security stacks built as disconnected layers with one vendor for document verification, another for bot detection, another for behavioral analytics.

These existing defense tools may struggle to respond coherently when adversaries operate across them simultaneously.

From Moment in Time to Context Over Time

For years, digital identity has revolved around discrete gates: onboarding, login, transaction approval. Pass the test, move forward. Fail it, stop. But that architecture had traditionally assumed a stable adversary and a static identity.

“We used to just block a bot,” Cohen said. “That’s really not the mechanism anymore.”

Today’s bots can be trained to look human in a single session. Meanwhile, real customers sometimes behave in unusual ways. The answer lies in comparing short-term activity with long-term patterns. Fraud appears in the gap between the moment and the baseline.

“The signal that emerges when you start comparing the live interactions against a customer’s longer-term history, that’s when you start catching fraud,” Cohen said.

“Instead of asking, ‘Did you pass that one test?’ the model really shifts to, ‘Does your behavior, device or network look consistent and does it make sense altogether?’” he added, noting that the future of identity-driven security and authorization is likely to lie in layer.

Device binding, behavioral baselining, risk-based step-up authentication, and continuous monitoring must work together. The goal of a identity solution moves from passing one test to establishing ongoing trust.

Continuous and Contextual Trust

The rise of AI agents adds another layer of complexity. As consumers begin to use digital assistants to complete transactions, identity systems must verify more than a person’s presence. Identity becomes tied to delegated authority.

“You need to verify not only the human, but the AI agent that’s acting on their behalf,” Cohen said. That includes confirming the agent is registered, cryptographically bound, and operating within permitted boundaries.

This introduces what Cohen called a “know your agent” requirement. Companies must validate the human, the agent, and the alignment between them.

His recommendation is to “escalate with precision, not blanket friction.”

“The key is matching that control to the uncertainty level, instead of forcing every customer through the longest path possible,” Cohen said, noting that when risk rises, businesses can increase controls in proportion to the uncertainty. They should also explain why the step-up is happening.

Identity verification is changing quickly. AI can undermine defenses, but it can also strengthen them.

Cohen’s own prescription for the year ahead was deceptively simple: continue working to connect context and continuity.

“You can’t do one well without the other,” he said. “You can’t have the right context unless you’re looking continuously over time.”

Companies that can connect context with continuity, and authorization with intent, may be better positioned to navigate a new AI-defined era of digital trust.

That shift appears in “Speed vs. Strategy: How Consumers Choose Between BNPL and Card Installments,” a new PYMNTS Intelligence report examining how Americans decide between buy now, pay later (BNPL), card installment plans and traditional revolving credit. Based on a survey of 2,980 U.S. consumers conducted in January, the research finds that Pay Later options are increasingly segmented by financial purpose. Consumers are not simply selecting a payment button at checkout. They are choosing a financial strategy.

The data shows that installment plans have become the dominant Pay Later product, while BNPL plays a more targeted role tied to speed and convenience. At the same time, store-branded installment plans are carving out a strategic position by combining both advantages.

Key Findings From the Report Include:

• 31% of consumers used credit card installment plans in January, compared with 12% who used BNPL. The gap of nearly 3 to 1 shows that installment products have become the most widely used Pay Later option across demographics and income levels.
• 43.4% of consumers say speed and approval are the primary reasons they choose BNPL. The data indicates that shoppers treat BNPL mainly as a fast access tool at checkout rather than a long-term credit solution.
• 34.2% of consumers cite credit management as the main reason they use credit card installment plans. This positions installment products as structured borrowing tools used for budgeting and managing credit limits.

The strategic divide is especially clear in how different payment products compete.

BNPL dominates when immediacy matters. Consumers turn to it for quick approval and low friction at the point of sale. Installment plans, by contrast, are tied to deliberate credit management. Users rely on them to spread payments in a structured way that fits within broader budgeting goals.

Store-branded card installment plans occupy a distinctive middle ground. Consumers cite speed and credit management almost equally as reasons for using them. That combination allows store cards to compete directly with BNPL during checkout while still functioning as a credit management tool.

Financial pressure can also shift how consumers use Pay Later products. When households face tighter budgets, BNPL expands beyond a simple convenience feature. Speed remains the leading motivation, but credit and liquidity needs begin to rise alongside it. Installment plans behave differently. Their use remains anchored in credit management regardless of financial stress.

Generational behavior reinforces this segmentation. Gen Z consumers show the clearest distinction between the roles of each payment option. They gravitate toward BNPL for its fast approval process while relying on installment plans to manage recurring or larger expenses.

For merchants, banks and FinTech providers, the findings point to a strategic reality. The Pay Later market is no longer a single product category competing on convenience alone. It is becoming a set of specialized financial tools that serve different consumer goals.

Companies that align their offerings with those roles may gain an advantage as the market matures.

The BNPL sector comes under the control of the Financial Conduct Authority (FCA) July 15, and the regulator confirmed its new safeguards for consumers in a Tuesday (Feb. 10) press release emailed to PYMNTS.

“We want the buy now, pay later sector to thrive,” FCA Deputy Chief Executive Sarah Pritchard said in the release. “It provides an important source of credit to many, and we will continue to support firms who want to develop innovative new products. But crucially, no one should be lent to if they’re unable to repay because that could worsen their financial situation. Now parliament has given us the powers, we’re putting in place proportionate protections for the 11 million people who use it.”

Under the new guidelines, lenders must be authorized by the FCA to offer BNPL loans. They are also required to conduct checks to ensure customers can afford to repay their loans before offering BNPL as an option and provide support to customers facing financial hardship.

The rules are also designed to give consumers clear information about their BNPL agreements, as well as the ability to complain to the Financial Ombudsman Service if something goes awry.

In a statement to PYMNTS, Damien Burke, head of regulatory practice at independent banking and credit risk advisory firm Broadstone, said the FCA’s “regulatory reset” is important in making sure borrowers understand the risks and the repayment obligations involved in BNPL. The challenge for the industry will be in implementation.

“Lenders will need to adapt systems, data and underwriting processes quickly, while maintaining the frictionless customer journeys that have driven BNPL’s popularity,” Burke said. “The temporary permissions regime should help smooth this transition, but firms that are not already operating to FCA standards may find the authorization process demanding.”

Meanwhile, Greg B. Davies, head of behavioral finance at Oxford Risk, cautioned that BNPL rules should take into account the “psychology of spending.”

“Affordability checks based purely on patchy credit histories are necessary but reactive,” he said. “Behavioral signals such as repeat usage, stacking across providers or escalating short-term commitments can indicate vulnerability earlier than traditional credit data.”

“The right goal is proportionate protection,” he added. “Preserve flexibility for those using the product responsibly, while introducing clearer visibility and friction where patterns suggest mounting risk. That is how you protect consumers without killing innovation.”

Alexander Berrai, deputy CEO at emerchantpay, said the FCA’s decision is a “necessary step” amid the increasing popularity of BNPL.

“Proportionate affordability checks and clearer consumer information should help ensure BNPL is used responsibly and that consumers are not taking on credit they cannot reasonably repay,” Berrai said.

The new rules are arriving as BNPL shifts from its origins as a “checkout convenience for sneakers and sofas” to a tool for paying for everything from groceries to utility bills to subscription renewals, PYMNTS reported Monday (Feb. 9). It’s a shift that carries financial consequences for consumers.

“Users who apply BNPL to essential or recurring expenses are more likely to pay interest than those who confine it to discretionary categories, reflecting both the frequency of these transactions and their role in managing cash flow between paychecks,” PYMNTS reported. “For many households, paying over time has become less about indulgence and more about maintaining day-to-day stability.”