A version of this article first appeared in the January BAI Executive Report: Fortifying your fraud defenses. Find more insight within from industry experts who help banking leaders keep step with fraud-fighting developments, including empowering staff and smoothing customer experiences.
More than 75% of banks report increases in consumer fraud, with 25% facing losses of $1 million or more. Meanwhile, consumers have experienced over $10 billion in cumulative fraud losses. Your bank is already under pressure with rising deposit costs, intense competition from interest rates, and high customer expectations for a seamless digital experience. And now, the impact of increased fraud adds another layer of complexity to the mix.
But there is a way forward.
With the right solutions, you can do more than protect your bank and customers from fraud—you can build trust and cultivate deep online relationships. Advanced fraud protection doesn’t just safeguard against risk; it enhances your bank’s relationship with customers. This can lead to more deposits, a stronger reputation as a secure and reliable bank, and a foundation for long-term success.
In this article, we’ll explore the riskiest step in the customer journey, its potential impact, and actionable strategies to navigate it successfully. You’ll also discover how strong fraud defenses can complement your growth strategy, transforming security and seamless digital experiences into a key competitive advantage.
Mitigating risk from the start
Banks are facing increasing threats that are not only difficult to detect but also harder to prevent. TransUnion Senior Director Sean Flynn explains:
“Fraud is persistent, ever evolving and is showing no signs of slowing down. Our research suggests that last year alone, the number of newly opened credit card accounts by potentially synthetic identities increased by 47%. Financial institutions of all sizes must develop and implement intentional enterprise strategies to resolve identity and combat today’s emerging fraud threats.”
TransUnion’s 2024 State of Omnichannel Fraud Report revealed that 13.5% of all newly created accounts last year—1 in 7—were suspected to be fraudulent. This makes account opening not just the starting point for customers but also the most targeted and high-risk stage for fraudsters, especially as digital channels dominate and the demand for frictionless experiences grows.
Synthetic identity fraud is at the heart of this challenge. Responsible for over $3 billion in annual losses, synthetic fraud combines real and fabricated information—such as a valid Social Security number—to create convincing fake identities. These identities easily bypass basic verification checks, enabling fraudsters to open new accounts under false pretenses. Once established, these accounts are used to access credit, loans, or other financial products, leaving banks to absorb the costs of fraudulent transactions, defaults, and chargebacks.
Unmitigated synthetic identity fraud threatens more than just your bottom line. It can trigger regulatory scrutiny, burden operations with costly case resolutions, and erode your customers’ trust and loyalty. However, by implementing advanced, multi-layered fraud prevention strategies within your digital account opening, you can protect your bank, maintain customer confidence, and safeguard long-term growth—achieving that critical balance of robust security and a user-friendly experience.
Seamless protection, trusted experience
Krisan Nichani, head of product strategy at Socure, perhaps said it best:
“As fraudsters leverage new technologies like generative AI, organizations need more than just point solutions — they need comprehensive visibility into the complex web of digital identities. In order to be best-in-class in stopping emerging threats, it’s critical to incorporate all components of an identity—including underlying PII [personally identifiable information]], device, behavioral elements, biometrics and network intelligence. By pairing these components with advanced AI capabilities, organizations can stay one step ahead of sophisticated fraud schemes.”
Advanced, multi-layered solutions—like AI-powered identity verification, device risk assessments, and behavioral analytics—are critical in identifying fraudulent activity. These technologies work together to detect red flags, such as mismatched personal details or unusual behavior, before they turn into costly fraud. For example, if a fraudster tries to open an account with fabricated information, AI-powered verification tools can automatically flag discrepancies, as opposed to being held up by manual review processes, enabling your bank to act quickly and safeguarding both your assets and your customers’ trust from day one.
But having the right fraud mitigation tools is only half the solution. These technologies must also integrate seamlessly into your bank’s existing systems and workflows. A smooth, frictionless process is essential, not only to maintain operational efficiency but also to ensure a seamless customer experience. When fraud detection runs quietly in the background without slowing down account openings or disrupting the user journey, your bank can build customer confidence, reassuring them that their financial data is being protected without compromising on the ease and speed they expect from modern banking.
The secure growth effect
By prioritizing security and trust, you’re not just protecting your customers but can also unlock greater opportunities for growth. As customers feel more confident in the safety of their accounts and personal data, they are more inclined to explore additional products and services. This reputation for reliability and security not only strengthens customer loyalty but also drives increased share-of-wallet and long-term relationships. Moreover, satisfied customers become advocates, sharing their positive experiences and offerings referrals.
So, while the staggering increase in fraud cases and the sophistication of their tactics are concerning, your bank can turn this combination of security and seamless digital experiences into a strategic advantage.
Megan Pulliam is Senior Vice President, MeridianLink Marketplace.
