Sumsub's Identity Fraud Report shows that between 2021 and 2023, identity fraud rates in the fintech industry increased by an astounding 73%. Though the statistics are alarming, why are they increasing?

New technologies are being developed to foster innovation in the sector, such as Gen AI, but fraudsters may also use these tools for nefarious purposes.

According to research conducted by ComplyAdvantage, one of the biggest new fraud risks is the illegal use of AI.

According to 66% of specialists in the financial industry, the use of AI by fraudsters gives a clear opportunity for cyberattacks to grow significantly. Contemporary concerns include deepfakes and the use of Gen AI to produce malware.

Philipp Pointer, Chief of Digital Identity at Jumio, tells us at Money20/20 USA in 2023: "Over the last two years, fraudsters have evolved a lot." It goes without saying that we must stay up to date with their increased activity and complexity and develop new strategies to combat them.

"I wouldn't be surprised if some of those people creating the fraud have worked for companies who are doing fraud detection," said Ofer Friedman, Chief Business Development Officer of AU10TIX, going a step further. "When we detect it, you can see them reading the minds of those trying to protect against it."

Fraud is a serious problem that is only getting worse. It permeates many different businesses and is especially prevalent in used goods markets.

In a recent poll of 1,300 purchasers, the consumer advocacy group Which? discovered that 32% of participants had experienced scams on used markets between January 2022 and January 2023.

According to a different Adyen study, 35% of UK retail organizations had experienced a data link or hack in the last year alone.

Roughly 86% of banks and other financial institutions (FIs) polled by ComplyAdvantage stated that they are dedicated to investing in innovative technology to counteract the increasing sophistication of fraudulent behavior.

Finserv's investment in fraud prevention and identity verification

Many new product releases from industry players have been announced in the first few months of 2024 alone, with the goal of strengthening ID verification and preventing fraud.

Financial services providers, FIs, and fintechs are utilizing Gen AI to power anti-fraud solutions, just as fraudsters are utilizing these skills to expand the scope of their harmful operations.

The new Visa Account Attack Intelligence (VAAI) Score solution, which was unveiled by the industry's top payments processor Visa to assist in determining the possibility of enumeration attacks in card-not-present transactions, is a perfect example.

Visa's broad reach has allowed them to reduce the number of identified accounts that have undergone fraud—33 percent—in the first five days after a fraudster has access to payment information. This solution was unveiled in May 2024.

Additionally, Mastercard has introduced Decision Intelligence Pro, an enhancement to its current Decision Intelligence program. This transaction risk tool evaluates the connections between various parties involved in a certain transaction.

Not just Visa and Mastercard are the top financial services companies stepping up their anti-fraud initiatives. Revolut, a well-known neobank in the UK, has introduced a sophisticated AI fraud detection tool to shield customers from card scams right before they happen. This ends the con artist's "spell" before money is transferred to the offender.

Therefore, financial leaders are employing the same technologies to battle the growing tide of fraud and stay up to date on the newest in ID verification and fraud prevention, even as AI helps criminals to scale their nefarious operations.