Banks Face Fraud Surge as Attacks Outpace Legacy Systems

Fraud is accelerating beyond the capacity of existing defense systems, leaving financial institutions increasingly vulnerable to unauthorized-party attacks. According to the 2025 State of Fraud and Financial Crime in the United States report by PYMNTS Intelligence, commissioned by Block, losses are rising as criminals exploit gaps in outdated security frameworks. The findings highlight a growing divide between institutions adopting advanced fraud prevention measures and those relying on legacy systems.

Background and Context

The rapid evolution of fraud techniques, combined with regulatory pressures and the rise of faster payment systems, has reshaped the risk landscape for banks. Unauthorized-party fraud, where criminals impersonate legitimate users to gain access to accounts, now accounts for the majority of financial losses. This shift underscores the limitations of traditional security models, which were not designed to counter the speed and sophistication of modern attacks.

Key Figures and Entities

The report identifies a widening gap between institutions leveraging AI, machine learning, and behavioral analytics to detect and prevent fraud, and those still dependent on slower, rule-based systems. While some banks have begun integrating advanced technologies, many remain exposed due to delayed adoption of these tools. The study emphasizes that the next phase of fraud defense will hinge on how quickly institutions can modernize their approaches.

Legal and Financial Mechanisms

Regulatory scrutiny is intensifying as authorities push for stronger safeguards against unauthorized-party fraud. Faster payment systems, while convenient, have also created new vulnerabilities, requiring real-time monitoring and adaptive security measures. The report notes that institutions failing to invest in AI-driven analytics risk falling behind, as these technologies are increasingly seen as essential for closing the gap between fraud tactics and defense capabilities.

International Implications and Policy Response

The implications of this fraud surge extend beyond individual institutions, threatening broader trust in the financial system. Policymakers and industry leaders are calling for coordinated action to address systemic weaknesses, including enhanced data-sharing protocols and updated regulatory frameworks. The report’s findings suggest that the divide between prepared and exposed banks could have far-reaching consequences for financial stability and consumer confidence.

Sources

This report draws on the 2025 State of Fraud and Financial Crime in the United States study by PYMNTS Intelligence, commissioned by Block, which analyzed data from financial institutions and regulatory filings between 2023 and 2025.