As artificial intelligence (AI) advances, its use in fraud has surged, with nearly half of all fraud attempts now linked to AI-driven tactics. A report from Signicat highlights that 42.5% of fraud detected in financial and payment sectors is AI-enabled.
This figure marks a significant shift, with a range of AI-powered tools, such as deepfakes, synthetic identities, and advanced phishing schemes, enabling fraudsters to operate on a previously unseen scale. Even more concerning, about 29% of these attempts are successful, raising alarm across industries already grappling with cybersecurity challenges.
The evolution of AI in fraud has made detection harder and more complex. What used to be simpler identity theft or credential forgery has been replaced by deepfakes and account takeover schemes that exploit existing vulnerabilities in authentication systems. Deepfakes, in particular, now account for 6.5% of all fraud attempts, representing a staggering rise in use over recent years. These fraudsters are no longer just creating false identities—they are manipulating real ones, often bypassing traditional security systems.
Despite the sharp increase in AI-driven fraud, the financial sector remains woefully underprepared. Only 22% of financial institutions have implemented AI-based defenses to counter the threat, leaving many exposed to evolving tactics that traditional systems simply cannot handle. As AI becomes more sophisticated, the gap between fraudsters and defenders widens, making it imperative for organizations to not only adopt AI in their defenses but to integrate it with other security layers such as biometric verification, behavioral analysis, and continuous monitoring.
Experts, including David Birch from Consult Hyperion, stress the need for a proactive approach to AI-driven fraud. Birch emphasizes that the first line of defense is identity, and robust, adaptable identity systems are crucial to combat the rise of AI-fueled attacks. Yet, many organizations are still in the planning stages of implementing such systems, with budget constraints, lack of expertise, and confusion about the most effective technologies slowing progress.
As AI enters fraud detection and prevention the financial sector is at a crossroads. Current defences are getting better but not good enough to stop the AI-driven attacks. Fraudsters will continue to use new technology, financial institutions must act now to protect their customers and the digital economy.
