NEW YORK—Financial institutions that mishandle scam incidents risk losing customers—and future business—according to a recent PYMNTS Intelligence report that frames fraud not just as a consumer harm issue, but as a growing threat to institutional trust and retention.
The report, commissioned by financial technology firm Block and based on a September survey of 15,110 U.S. consumers, found that nearly four in 10 U.S. households have fallen victim to a financial scam over the past five years, PYMNTS reported. While individual losses from schemes such as gift-card fraud, tech-support scams, investment fraud and Social Security impersonation often total hundreds or thousands of dollars, the broader damage to financial institutions comes from eroded trust and customer churn.
According to PYMNTS, the way a bank or other financial institution responds after a scam is reported plays a decisive role in whether a customer remains loyal or leaves for a competitor. Consumers who successfully recover funds report significantly higher confidence in their financial institutions, while those who do not often sever the relationship altogether. BioCatch, citing data from credit scoring firm FICO, found that 45% of fraud victims stopped using the financial institution where the crime occurred, and nearly one in four canceled their credit cards.
The institutional impact is already being felt. Half of financial institutions surveyed by PYMNTS Intelligence said fraud had a negative effect on customer loyalty, while more than four in 10 reported brand damage tied directly to scam incidents. Nearly half of institutions—48%—said lost customer trust due to fraud has cost them new business opportunities, and 47% reported operational disruptions stemming from fraud-related fallout. Another 36% said fraud experiences reinforced the need to invest in new technologies to strengthen defenses and resilience.
PYMNTS reported that institutions face an added risk when scams go undetected or unreported: without awareness of the incident, they lose the opportunity to help the victim, repair trust, or improve fraud controls. Even when scams are reported, consumer confidence can collapse further if customers believe their financial institution will not make things right.
The findings underscore that post-incident response—not just fraud prevention—has become a defining test for financial institutions. As PYMNTS noted, how an institution manages the recovery journey increasingly determines whether a customer relationship survives or ends.