Seven in 10 banks increase fraud spend as losses rise

This is a core takeaway from the State of Fraud and Financial Crime in the U.S. 2025 report produced by PYMNTS Intelligence in partnership with Block.

Research shows that while fraud losses are rising, the deeper impact is on trust, operations and long-term strategy, beyond reimbursements and chargebacks.

The report found that fraud tactics were shifting again, as usual.

The surge in activity from unauthorized parties reverses last year's pattern and serves as a reminder to agencies that fraud does not develop in a straight line. At the same time, financial firms are dealing with growing pressure. Faster payments, more payment types, and ever-expanding compliance obligations are straining fraud teams.

As a result, technology spending is increasing but unevenly, leaving a gap between large and small institutions.

Three data points illustrate how things are changing:

• Unauthorized party fraud currently accounts for 71% of incidents and dollar losses, a significant increase from the previous year. Credential theft and account takeover are once again the main threats, signaling a new wave of external attacks rather than customer-driven abuse.
• In 2025, the average fraud loss rate will reach 0.8 basis points, with large banks reporting losses more than four times higher than the industry average. Neobank exposure has also increased, reflecting the trade-offs that come with speed, scale and a digital-first model.
• Nearly seven in 10 financial institutions have seen spending on fraud detection increase year over year, with 46% saying fraud schemes have become more sophisticated. As businesses increasingly view fraud technology as core infrastructure rather than optional upgrades, cost is no longer a barrier to investment.

Beyond these headline figures, the report highlights how fraud is reshaping institutions internally. Half of the companies surveyed said fraud damaged customer loyalty, while nearly as many reported lost business opportunities and operational disruptions. These are long-tail effects that persist even after losses are compensated. In other words, fraud erodes confidence before it erodes capital.

Research also shows that modernization is uneven. Artificial intelligence and behavioral analytics are now widely used by large banks and fintech companies, with around eight in 10 reports using the technology.

Smaller regional agencies often lag behind legacy systems, integration challenges and competing priorities. This gap is important. Fraudsters adapt quickly, and uneven defenses can create weaknesses throughout the financial system.

Importantly, the report shows that the mindset in the industry is changing. Agencies are no longer viewing fraud prevention as a reactive function.

Machine learning is increasingly used to combine real-time detection with proactive prevention, allowing companies to predict suspicious behavior rather than react after the fact. The investment plan points to a layered approach that combines cloud platforms, in-house tools, third-party partners and improved customer communications.

The broader message is simple. Fraud is not a problem that can be solved once and for all. This is a constant pressure that impacts technology roadmaps, regulatory readiness and customer relationships.

Institutions that view fraud prevention as a strategic capability rather than a defensive necessity are better able to protect trust and sustain growth. This transformation is already underway.

At PYMNTS Intelligence, we work with businesses to uncover insights and drive intelligent, data-driven discussions about changing customer expectations, a more connected economy, and the strategic shifts needed to deliver results. With rigorous research methods and an unwavering commitment to objective quality, we deliver data you can trust to grow your business. As our partner, you'll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans, and editorial experts.