The Intersection of Financial Institutions and Technology Leaders

Keeping Up With Fraud Trends

By Kiah Lau Haslett


Digital banking has made it easier to attract customers and for those customers to transact online or on mobile devices. It’s also created numerous points of entry for fraudsters — an increasingly complicated and expensive problem for financial institutions.

Online and mobile banking made up about 62% of fraud attempts reported by U.S.-based banks, according to Alloy’s 2024 State of Fraud Benchmark Report. In comparison, human touchpoints like contact centers and bank branches accounted for just 25% of those attempts. And fraud is increasingly expensive: 54% of respondents told Alloy that they incurred more than $500,000 in direct fraud losses.

“Right now, the things that banks are the most concerned about are the things that banks are the least prepared for,” says Tommy Nicholas, CEO of Alloy, an identity risk platform that helps banks and credit unions with fraud detection and compliance. 

That’s true in Bank Director’s surveys, too. Bankers say the major challenges to fraud prevention programs are emerging threats, and customer communication and education, according to respondents to Bank Director’s 2023 Technology Survey, sponsored by Jack Henry & Associates. Respondents reported using a variety of techniques and technologies in their fraud detection and prevention programs, including biometrics, tokenization and behavioral analysis. 

Nicholas says executives struggle to keep up with the sophisticated techniques and technology that criminals use, which sometimes includes synthetic identities that combine real personal identifying information from someone with fake information. Understanding a customer’s identity is key to fighting fraud. The Financial Crimes Enforcement Network, or FinCEN, found that 42% of suspicious activity reports filed in 2021, totaling $212 billion, dealt with identity-related suspicious activity. 

On the positive side, Nicholas seeing progress within institutions to align fraud priorities between upper-level management and individual fraud fighters, given a “massive” misalignment in previous Alloy surveys. He says that indicates that banks are having internal conversations around the impact of fraud on the institution as well as their desire to change. 

One way the industry could improve is to shift away from a focus on customer onboarding and transaction monitoring to a holistic approach that spans the entire relationship. Banks and credit unions could better incorporate behavioral analytics and external data sources, for example. Financial institutions must figure out how to insert enough friction into their online experiences to deter fraudsters without annoying legitimate customers during their transactions.

“It’s a common understanding to think that fraud can be perfectly detected and prevented,” Nicholas says. What you can do perfect is making fraud “so expensive and painful that nobody will do it.”

Kiah Lau Haslett is the Banking & Fintech Editor for Bank Director. Kiah is responsible for editing web content and works with other members of the editorial team to produce articles featured online and published in the magazine. Her areas of focus include bank accounting policy, operations, strategy, and trends in mergers and acquisitions.