Credit Unions Fight Fraud With Tougher Tech and Smarter Members

Credit unions (CUs) have long prided themselves on being the “people’s bank” — local, personal and rooted in trust. But guess what? That makes them an even bigger target for fraudsters looking for an easy payday.

The latest PYMNTS Intelligence findings show that as fraud persists, more CUs are at risk. In fact, 79% of CUs and community banks saw direct fraud losses of more than $500,000 between late 2022 and late 2023. This share is larger than any other banking segment. Moreover, in mid-2024, 33% of CUs said scam cases had skyrocketed by 50% to 100% in the previous year.

The rise of real-time payments, the explosion of digital banking and the increasingly sophisticated tactics of cybercriminals mean yesterday’s defenses won’t cut it anymore. From phishing schemes to synthetic identity fraud, the bad guys are getting craftier by the day, and credit unions are feeling the heat.

Just ask any CU executive who’s had to explain to an irate member why their account was drained by a scammer impersonating their grandkid. It’s ugly, and it’s getting worse.

But credit unions aren’t defenseless. And they’re starting to fight back. The ongoing escalation across the fraud landscape has prompted these member-focused financial institutions to adopt advanced technologies and form strategic partnerships to protect their assets and educate members to maintain trust.

The best part? It’s working.

If fraudsters are upgrading their playbook, credit unions need to level up, too. That means doubling down on advances like artificial intelligence (AI) and automation. The ability to detect anomalies in real time can mean the difference between blocking a fraudulent transaction and losing thousands of dollars.

While big banks have been pumping billions into fraud-fighting tech, but credit unions — often working with tighter budgets — are finding smarter, cost-effective solutions. Advanced behavioral analytics can now detect fraudulent behavior before it happens. A member who typically withdraws $200 at their local branch isn’t suddenly wiring $5,000 to an overseas account without raising some serious red flags.

After all, the fight against fraud is a never-ending arms race, and credit unions can’t afford to fall behind. 43% of CUs report that fraud detection/mitigation ranks among their top three technology investment priorities for 2024 and 2025.

Credit union service organization Velera, for instance, introduced a solution that allow members to manage their card information across various merchants help in reducing unauthorized transactions. These tools not only bolster security but also align with members’ expectations for safety and convenience in their financial interactions, combatting first-party fraud while simplifying members’ expense management.

Read more: Scam Surge: How Credit Unions Are Tackling Rising Security Threats

Technology can only do so much — at the end of the day, the weakest link is often the members themselves. Scammers are getting better at social engineering, tricking members into handing over login credentials, account info or even authorizing fraudulent transactions. That’s why education is key.

Fraudsters prey on the uninformed, and many CUs are ramping up member education campaigns. Educating members about common scams, such as phishing and social engineering, empowers them to recognize and avoid potential threats. Training programs and awareness campaigns can significantly reduce the success rate of fraud attempts by fostering a culture of vigilance among the member base.

At the same time, CUs are increasingly forming partnerships to strengthen their defenses against fraud. PYMNTS Intelligence data finds that 42% of CUs prioritize fraud reduction when collaborating with FinTech companies.

For credit unions, the message is clear: Adapt, innovate, and fight back — or risk being outplayed by the fraudsters.

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