Financial institutions are bracing for a significant increase in fraud losses, with a new study by Juniper Research forecasting a 153% surge by 2030. The report, titled "Fraud Detection & Prevention in Banking Market 2025-2030," projects that fraud will rise from $23 billion in 2025 to a staggering $58.3 billion by 2030 .
This dramatic increase is attributed to the evolution of fraud techniques, particularly synthetic identity fraud. This involves creating identities using a combination of real, stolen, and fake information to establish new personas for opening accounts and applying for credit .
The rise of synthetic identities
Synthetic identity threats are becoming increasingly sophisticated, with fraudsters leveraging AI to create convincing new identities based on existing, stolen information. These AI-generated identities can evade traditional fraud checks, forcing financial institutions to enhance their detection and prevention methods .
To combat this growing threat, banks must implement continuous identity verification throughout the customer lifecycle. Biometric behavioural analysis, such as monitoring typing rhythms or touch patterns, can play a crucial role in identifying anomalies in real-time .
Regulatory scrutiny intensifies
The consequences of failing to address fraud extend beyond financial losses. Financial regulators are taking a tough stance on institutions with inadequate fraud prevention measures.
According to Lorien Carter, senior research analyst at Juniper Research, "The rise in fraudulent transactions has effects reaching beyond fraud loss.
She cites the recent spate of banks being fined for failing to correctly identify high-risk transactions, such as Monzo, Barclays, and TD Bank, displays that regulators are taking this issue extremely seriously.
"Financial institutions must increase investment in their fraud detection teams and technology to avoid further monetary and reputational losses."
The Financial Conduct Authority (FCA) fined Monzo Bank £21 million for failings in its financial crime controls. Monzo also repeatedly breached a requirement preventing it from opening accounts for high-risk customers between August 2020 and June 2022.
Similarly, Barclays was hit with a £42 million penalty for shortcomings in managing financial crime risks.
As fraud techniques evolve, financial institutions must prioritise investment in advanced fraud detection technologies and robust compliance measures to mitigate financial and reputational risks.
