According to PYMNTS.com, a new survey of 200 executives from major U.S. banks and FinTechs, conducted from Sept. 30 to Oct. 15, 2025, reveals a sharp rise in fraud complexity. Average fraud loss rates hit 0.8 basis points, but large banks reported losses nearly four times that industry average. A significant 46% of institutions reported an increase in the sophistication of fraud schemes, while 47% are juggling overlapping regulatory requirements and 41% face operational pressures from faster payments. In response, 68% of firms plan to increase their fraud-detection spending year-over-year, with AI and behavioral analytics cited as key tools. The damage, however, extends beyond money: half of institutions report harm to customer loyalty, with nearly as many citing reputational harm and lost business.
The Scale Problem Is Real
Here’s the thing that report nails: being big is a massive liability right now. Large banks losing at nearly 4x the average rate? That’s not a fluke. It’s the direct result of legacy systems—the creaky, old tech backbone of these giants—meeting the velocity of modern digital payments. They’re trying to move money in seconds on infrastructure built for batch processing that took days. And fraudsters know it. They’re exploiting the seams between the shiny new payment rail and the dusty old core system. So all that scale and speed they brag about? It’s basically a bigger, faster target.
Spending More Isn’t a Silver Bullet
Look, 68% planning to spend more is predictable. It’s the corporate playbook: throw money at the problem. And yes, AI and advanced analytics are the defining tools. But I’m skeptical. Is this investment going toward truly modernizing those legacy cores, or is it just another layer of expensive band-aids? The report talks about “hybrid defense models,” which sounds a lot like trying to bolt a jet engine onto a horse-drawn carriage. You might go faster for a bit, but the fundamental structure can’t handle it. The operational pressures (cited by 41%) won’t be solved by AI alone if the underlying system can’t communicate in real-time.
The Real Cost Is Trust
This is the killer insight. The direct financial loss? Almost a secondary concern. When half of these institutions say customer loyalty is damaged, they’re admitting the fraud fight is now a frontline brand issue. You can refund a stolen $500. You can’t easily refund a destroyed sense of security. Reputational harm and lost business opportunities are the long-tail costs that will haunt them for years. In an era where consumers have more choices than ever—hello, FinTechs—a reputation for being leaky is a death sentence. So all that fraud investment isn’t just a compliance cost. It’s now the core of customer retention.
A Tough Road Ahead
So where does this leave us? The path forward, as the report suggests, is continuous modernization and better customer communication. But that’s a multi-year, brutally expensive journey. For the big banks, it’s like trying to replace the foundation of a skyscraper while everyone’s still living and working inside. Smaller FinTechs might be more agile, but they lack the resources. It creates a weird paradox: the tools to fight fraud (AI, cloud infrastructure) exist, but the organizational and technological debt to implement them properly is staggering. The next few years will be about which institutions treat this as a fundamental systems overhaul, and which just keep buying more band-aids. Bet on the former.
