Financial institutions are under siege as artificial
intelligence fuels a new wave of fraud. A recent report by identity
verification firm Veriff reveals a troubling surge in online ID scams—one in
every 20 verification attempts in financial services is now fraudulent.
With deepfakes and AI-powered deception on the rise,
the cost is hitting both consumers and companies hard. According to Veriff’s
latest “Future of Finance” report, identity fraud in the financial sector rose
by 21% over the past year.
A 21% Yearly Spike in Identity Fraud
The study, which combines in-house data and survey
responses from professionals and consumers, paints a picture of an ecosystem
increasingly manipulated by deepfakes and AI-generated content.
Fraud has become personal. Over a third of U.S.
consumers surveyed said they suffered financial losses that couldn’t be
recovered. The damage is not limited to individuals.
One-third of fraud professionals report their firms
lost between 3% and 5% of annual revenue to fraud, an unsustainable so-called
“fraud tax.”
“Financial services organizations are natural targets for
sophisticated fraudsters. But by embracing technological evolution in AI,
biometrics, and identity verification (IDV), financial services leaders can
protect their companies and their customers – and seize the opportunities the
ever-evolving digital world will bring,” said Ira Bondar, Senior Fraud Group
Manager at Veriff.
Among the most concerning trends is the rise of
“authorized fraud,” where scammers trick victims into participating in identity
verification, often by impersonating banks or officials.
Authorized Fraud Is the Fastest-Rising Threat
This form of fraud has grown alongside AI
capabilities, making it easier for attackers to insert themselves digitally
between the user and a financial institution.
These adversary-in-the-middle attacks, whether
physical or digital, enable fraudsters to seize control of legitimate accounts.
Veriff found that authorized fraud now accounts for 1.5% of all fraud attacks
in financial services, much higher than in sectors like gambling or HR, where
it’s virtually non-existent.
AI Arms Both Sides of the Battle
The same technology that enables fraud is also being
used to fight it. Nearly two-thirds (64%) of U.S. fraud professionals already
deploy AI and machine learning tools in prevention efforts, with another 20%
planning to adopt such tools within a year. In the UK and Brazil, similar
adoption rates are observed.
Trust plays a central role. Over 82% of consumers say
they won’t register with financial platforms they believe have weak fraud
prevention systems. Biometrics, especially facial recognition, emerged as the
preferred method of secure interaction for 38% of respondents.
Most companies have already taken action: 83% of
financial firms now use some form of identity verification or biometric
solution, and 81% plan to increase investment in such tools. Early adopters
report a noticeable drop in fraud rates.
More Fraud, Smarter Defenses
A majority of fraud professionals, 89%, expect attacks
to intensify in 2025. Malware, impersonation, authorized fraud, account
takeovers, and document forgery rank among the top concerns. AI, while a driver
of these threats, also remains their best hope for defense.
The report underscores that financial services are
natural targets for organized fraud networks. With growing access to powerful
AI tools, fraud-as-a-service has become a booming underground economy.
Still, Veriff insists the path forward is not entirely
bleak. By doubling down on AI-driven ID verification and consumer education,
firms can better safeguard their systems and restore consumer trust in the
digital age.
This article was written by Jared Kirui at www.financemagnates.com.
