BOSTON–The financial industry is navigating an increasingly sophisticated and dynamic threat landscape, with a “significant surge” in unauthorized-party fraud, reversing the pattern seen in the previous year, according to a new report.
The report, the “2025 State of Fraud and Financial Crime in the United States” report, from PYMNTS Intelligence report commissioned by Block, found unauthorized-party schemes, driven by credential theft and account takeovers, now account for 71% of all incidents and dollar losses.
“This shift underscores the growing need for adaptive, intelligence-driven defenses among financial institutions (FIs),” PYMNTS said.
‘Sharp Disparities’
According to the study, average fraud loss rates across the industry rose modestly to 0.8 basis points, though this average masks sharp disparities, the company said.
“Notably, large banks reported losses nearly four times the industry average, signaling greater exposure due to scale and speed. The fact that 46% of financial institutions report an increase in the sophistication of fraud schemes further highlights the increased complexity and risk,” PYMNTS said in its analysis. “Institutions are concurrently managing overlapping regulatory requirements (47%) and operational pressures tied to faster, more diverse payment systems (41%).”
In response to these threats, the PYMMNTS study found 68% of firms plan to increase their fraud-detection spending year over year. The report identifies artificial intelligence and advanced behavioral analytics as the defining tools of modern fraud defense, enabling institutions to adopt a balanced approach that is both proactive (anticipating fraud) and reactive (accelerated response).
More Than Financial Losses
“However, the cost of fraud extends far beyond direct financial losses,” PYMNTS stated. “Half of institutions report damage to customer loyalty, and nearly as many cite reputational harm and lost business opportunities, emphasizing that fraud now poses a significant threat to long-term growth and trust. Future investment strategies focus on continuous modernization, hybrid defense models that combine AI and cloud infrastructure, and improved customer communication to reinforce security and trust.”
What Will be Learned
In “2025 State of Fraud and Financial Crime in the United States,”PYMNTS said reads will learn:
- Unauthorized fraud is growing: Unauthorized-party fraud (e.g., account takeovers, credential theft) surged to represent 71% of all incidents and dollar losses, reversing previous trends.
- AI serves as an essential defense: Widespread integration of AI and behavioral analytics is transforming fraud defense from reactive, rules-based systems into adaptive, intelligence-driven capabilities.
- Consumer trust suffers: The true impact of fraud is on the customer, including damaged customer loyalty (50%) and reputational harm (44%), demonstrating a threat to long-term growth beyond financial losses.
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