Emerging Fraud Trends in 2025

As digital payments increase, fraudsters continue to become more sophisticated by leveraging new technologies such as artificial intelligence (AI), leading to significant increases in fraud losses. As a result, in 2024, U.S. mid-market financial institutions (FIs) experienced a 52% increase in the frequency of attempted fraud events, with 68% of fraud events occurring online and on mobile banking channels.¹ The implications of payment fraud are far-reaching and multifaceted, affecting both consumers and FIs. Outside of financial impact, payment fraud can negatively affect the cardholder experience and erode their trust in their FI.

How is the fraud landscape changing?

Rapid technological advancements have resulted in significant changes in the fraud landscape, with 93% of FIs expressing concern over fraudster’s use of AI. ² AI-powered fraud attacks have become increasingly sophisticated over the years, leveraging machine learning to exploit systematic vulnerabilities, automating attacks at scale, taking over identities and accounts, and more. Compounding the challenge, FIs report that most fraud events at their institutions target online and mobile banking channels, underscoring the prevalence of card-not-present fraud (e.g. online payments, over-the-phone payments, etc.)¹

Emerging fraud types

The following three emerging payment fraud types demand heightened vigilance in the wake of technological advancements:

• Card-not-present fraud: Card-not-present (CNP) fraud is a form of card fraud that occurs when bad actors use stolen card details to make unauthorized transactions without a physically present card, most commonly online or over the phone.³ In 2024, 65% of FIs ranked CNP fraud as the most prevalent fraud type their institution had experienced in the last twelve months.⁴ This is largely due to the lack of controls in the digital environment.
• Synthetic identity fraud: Synthetic identity fraud occurs when bad actors combine real and fabricated personal data to create a fake identity and commit fraud.5 Concerns surrounding the use of sophisticated technologies, such as GenAI, to create these deepfake identities is on the rise.
• Account takeover: Account Takeover (ATO) occurs when bad actors gain unauthorized access to a user’s debit or credit account – sometimes through a simple change of address – and use the account without the accountholder’s authorization. 6 ATO was ranked by FIs as the third most prevalent fraud attack they faced between 2023 and 2024. This significant event can largely be attributed to the volume of compromised personal data (usernames, passwords, etc.) circulating the dark web due in part to data breaches at merchants and credit bureaus.⁴

Key trends to combat fraud

FIs can be well positioned to prevent or reduce such fraud occurrences through proactive measures and tools. Strategic partners such as TransFund, who invest in countermeasures, can play a significant role in this process.

• Artificial intelligence: Although the market is growing increasingly concerned over fraudster’s use of advanced technologies such as AI, a 2025 report reveals that 99% of FIs currently leverage AI themselves to fight fraud. AI-based solutions enable FIs to proactively identify systematic attacks, simply explain complex data sets, enhance rule-based decision-making processes, detect anomalous activity, and streamline manual processes.¹ For example, TransFund's Fraud Defender has various modules that enable predictive alerts to identify fraud as it is happening; the SecureLock suite reduces instances of CNP by blocking suspicious transactions in real-time.
• Staff/Cardholder education: It is crucial for FI employees to be aware of which cardholder demographics are most susceptible to fraud, so they can educate them about potential risks and empower them to effectively identify suspicious activity themselves. A 2024 study found that 21% of mid-market FIs rank staff education as one of the investments that had the greatest impact on reducing fraud rates at their institiution.1 TransFund’s product Defender, which grants FIs 24/7 personalized support from fraud consultants, can further enhance such education initiatives.
• Identity risk solutions: As rates of Account Takeover and Synthetic Identity Fraud persist, FIs have increasingly leveraged identity solutions to reduce fraud. One in three organizations report that implementing identity risk solutions yielded the most significant impact on overall fraud mitigation.¹ Solutions such as TransFund’s Defender deploy fraud scoring, based on behavioral and transaction patterns on an ongoing basis, enabling users to flag synthetic profiles. In addition, the SecureLock suite blocks suspicious account activity while notifying members via SMS, phone, or email.

Conclusion

Fraud threats in 2025 – particularly card-not-present, account takeover, and AI-driven synthetic identity fraud – demand advanced defenses. Combating these threats requires a wide array of tools ranging from artificial intelligence to staff and cardholder education. Partnering with TransFund can provide valuable support in this ongoing fight against fraud; by staying informed about emerging trends, investing in advanced fraud prevention tools, and fostering a culture of awareness, FIs can better protect themselves and their cardholders from the potentially devastating effects of fraud.

If you’re a current TransFund client and would like to reach the Fraud Services team, please contact TTFraud@transfund.com. Not a current TransFund client? Click here to connect with us.

Sources

1. Alloy, 2025 State of Fraud Report, 2025
2. DataVisor, Top Fraud Trends and Predictions for 2025 – And How Will the Industry Respond?, 2025
3. Stripe, What is card-not-present fraud? What businesses need to know, 2024
4. Datos Insights, Digital Defense: Top Fraud Threats and Strategic Investments in Banking, 2025
5. Experian, What is Synthetic Identity Theft?, 2024
6. Mastercard Developers, Fraud and Loss Database User Guide