Fraud Spending Surges at 70% of Banks as Losses Mount and Threats Evolve

Nearly seven in ten financial institutions have increased their fraud detection budgets over the past year as losses accelerate and criminal tactics grow more sophisticated, according to a comprehensive industry analysis. The surge in investment reflects a fundamental shift in how banks and payment firms view fraud—not merely as a cost of doing business, but as a strategic challenge reshaping technology investment, customer relationships, and competitive positioning.

The "2025 State of Fraud and Financial Crime in the United States" report, produced by PYMNTS Intelligence in collaboration with Block, reveals that unauthorized-party fraud has rebounded sharply to account for 71% of incidents and losses, reversing last year's trends and signaling renewed waves of external attacks targeting financial institutions.

Background and Context

The financial services industry finds itself caught between competing pressures: the rapid expansion of payment types, increasing demand for faster transactions, and growing compliance obligations are stretching fraud detection capabilities to their limits. According to the research, these factors have converged to create an environment where criminal enterprises can exploit gaps in real-time monitoring and detection systems.

Industry analysts note that fraud patterns rarely move in straight lines, with attackers continuously adapting their methods in response to defensive measures. The current surge in unauthorized-party fraud, dominated by credential theft and account takeover schemes, demonstrates how external threats can resurge after periods of relative calm, requiring institutions to maintain vigilance across multiple attack vectors simultaneously.

Key Figures and Entities

The report identifies significant disparities in fraud exposure across different institution types. Large banks reported losses more than four times higher than the industry average of 0.8 basis points in 2025, while neobanks also showed elevated vulnerability. These patterns suggest that both scale and digital-first business models create distinct fraud risk profiles that require tailored defensive strategies.

Financial institutions responding to the survey indicated that 46% have observed increased sophistication in fraud schemes over the past year. The most concerning trend has been the resurgence of unauthorized-party fraud, which now represents 71% of both incident counts and dollar losses—a sharp reversal from 2024 patterns when customer-driven misuse was more prevalent.

Legal and Financial Mechanisms

The financial impact of fraud extends beyond direct losses to affect long-term business metrics. Half of surveyed firms reported damage to customer loyalty, while nearly as many cited lost business opportunities and operational disruptions. These indirect costs compound the immediate financial hit from fraudulent transactions, creating a ripple effect throughout institutions' operations and customer relationships.

Technology adoption patterns reveal uneven implementation of advanced fraud prevention tools. While approximately 80% of large banks and FinTechs have deployed artificial intelligence and behavioral analytics, smaller and regional institutions lag behind due to legacy system constraints and integration challenges. This technological disparity creates weak points that fraudsters can exploit across the interconnected financial ecosystem.

International Implications and Policy Response

The evolving fraud landscape has prompted a strategic shift in how institutions approach prevention, moving from reactive detection to proactive risk management. Machine learning systems are increasingly being deployed to anticipate suspicious behavior before transactions complete, rather than merely responding to alerts after fraud has occurred.

Regulatory bodies worldwide have taken note of these trends, with various jurisdictions examining whether current frameworks adequately address the speed and sophistication of modern financial crime. The uneven implementation of advanced detection technologies across different institution sizes has raised questions about systemic vulnerability, as fraudsters can potentially identify and exploit weaker defensive measures at smaller institutions before moving to larger targets.

Sources

This report draws on the "2025 State of Fraud and Financial Crime in the United States" study published by PYMNTS Intelligence in collaboration with Block, which surveyed financial institutions of varying sizes across the United States. The research examined fraud patterns, prevention investments, and strategic responses through 2025.