NEW YORK— Banks are increasingly treating fraud prevention as a core business function rather than simply a back-end loss-control exercise, as faster payments, account takeovers and rising customer expectations force institutions to view fraud defenses as critical to growth and trust, according to new data from PYMNTS.
According to PYMNTS, its new “2025 State of Fraud and Financial Crime in the United States” report, produced with Block, found unauthorized-party fraud now accounts for 71% of fraud incidents and dollar losses, driven largely by credential theft and account takeovers. PYMNTS said that marks a sharp shift from a year ago, when fraud losses were more evenly distributed across types.
PYMNTS reported average fraud loss rates rose to 0.8 basis points, with large banks reporting losses of 3.6 basis points and neobanks at 1.1 basis points, underscoring the uneven pressure fraud is placing across institution types. But PYMNTS said the more important trend may be that institutions are responding by elevating fraud tools from a secondary expense to what is increasingly seen as essential infrastructure.
That shift is showing up in spending and technology adoption, with PYMNTS reporting 68% of financial institutions increased fraud-detection spending year over year, while the share citing cost as a barrier to adopting new tools fell to 36% from 60% in 2024. PYMNTS added that 70% of institutions said machine learning helps them balance proactive and reactive fraud strategies, while 50% said fraud damages customer loyalty and 48% said it costs them new business opportunities.
PYMNTS said behavioral analytics and machine learning are moving further into the mainstream, with roughly eight in 10 fintechs and large banks now using advanced behavioral analytics. At the same time, the report found about one in five institutions—particularly smaller and regional banks—still lack those tools, a gap PYMNTS suggested could leave some firms more exposed as fraud patterns evolve in real time.
The report points to a broader strategic takeaway for financial institutions: fraud is increasingly a business and growth issue as much as a risk issue. PYMNTS said banks are layering artificial intelligence with rules-based controls, improving customer communication, relying more on cloud-based systems and turning to third-party partners where legacy systems cannot keep pace—moves that suggest stronger fraud defenses are becoming as important to preserving customer confidence and future revenue as they are to reducing direct losses.