Fraud is no longer just a cost line item for banks and payment firms. It is increasingly a force that shapes how institutions invest, modernize and compete.
That is the central takeaway from the “2025 State of Fraud and Financial Crime in the United States” report from PYMNTS Intelligence, produced in collaboration with Block.
The research shows that while fraud losses are rising, the deeper impact is showing up in trust, operations and long-term strategy, not just reimbursements and chargebacks.
The report finds that fraud tactics have shifted again, as they pretty much always do.
Unauthorized-party activity has surged, reversing last year’s pattern and reminding institutions that fraud does not move in a straight line. At the same time, financial firms are grappling with a growing mix of pressures. Faster payments, more payment types and expanding compliance obligations are all stretching fraud teams.
Technology spending is rising as a result, but not evenly, leaving gaps between large institutions and smaller players.
Three data points illustrate how the landscape is changing:
- Unauthorized-party fraud now accounts for 71% of incidents and dollar losses, up sharply from the prior year. Credential theft and account takeovers are again the dominant threat, signaling a renewed wave of external attacks rather than customer-driven misuse.
- Average fraud loss rates reached 0.8 basis points in 2025, with large banks reporting losses more than four times higher than the industry average. Neobanks also show elevated exposure, reflecting the trade-offs that come with speed, scale and digital-first models.
- Nearly 7 in 10 financial institutions increased fraud-detection spending year over year, and 46% report that fraud schemes have become more sophisticated. Cost is becoming less of a barrier to investment, as firms increasingly view fraud technology as core infrastructure rather than an optional upgrade.
Beyond these headline figures, the report highlights how fraud is reshaping institutions internally. Half of surveyed firms say fraud has hurt customer loyalty, while nearly as many cite lost business opportunities and operational disruptions. These are long-tail effects that linger even after losses are reimbursed. Fraud, in other words, erodes confidence before it erodes capital.
The research also shows that modernization is uneven. Artificial intelligence and behavioral analytics are now widely used by large banks and FinTechs, with roughly 8 in 10 reporting adoption.
Smaller and regional institutions lag behind, often constrained by legacy systems, integration challenges and competing priorities. This gap matters. Fraudsters adapt quickly, and uneven defenses can create weak points across the financial system.
Importantly, the report suggests that the industry’s mindset is changing. Institutions are moving away from viewing fraud prevention as a reactive function.
Machine learning is increasingly used to blend real-time detection with proactive prevention, allowing firms to anticipate suspicious behavior rather than respond after the fact. Investment plans point toward a layered approach that combines cloud platforms, internal tools, third-party partners and improved customer communication.
The broader message is straightforward. Fraud is not a problem that can be solved once and put aside. It is a constant pressure that influences technology road maps, regulatory readiness and customer relationships.
Institutions that treat fraud prevention as a strategic capability, rather than a defensive necessity, are better positioned to protect trust and sustain growth. That shift is already underway.
At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data 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.
