Stronger Digital IDs Help Stop $34 Billion in Fraud Losses

Fraudsters have been using artificial intelligence, automation and highly convincing impersonation tactics to steal identities.

Once they have those identities in hand, they can (and do) orchestrate increasingly sophisticated social engineering schemes, forcing financial institutions and technology providers to reassess how trust is established in digital interactions, at times before the transaction is even underway.

The challenge now extends beyond conventional credential theft. Financial services firms operate in an environment where identity verification sits at the center of revenue generation and risk management, yet 66% reported that verification technologies produce inconsistent results, according to the PYMNTS Intelligence report “The Hidden Costs of ‘Good Enough’: Identity Verification in the Age of Bots and Agents,” a collaboration with Trulioo.

These performance gaps, coupled with rising exposure to synthetic identity fraud and account takeover, illustrate how identity weaknesses translate directly into financial losses and operational strain.

Verification failures, in turn, contribute to revenue losses averaging 3%, amounting to an estimated $34 billion annually across the industry.

At the same time, fraud tactics have evolved in ways that exploit precisely these inconsistencies. Synthetic identity fraud, stolen identity misuse and impersonation schemes increasingly rely on technology capable of mimicking legitimate behavior at scale. Automation allows criminals to test vulnerabilities repeatedly, while AI tools enhance the realism of fraudulent communications.

Consumer-facing data reinforce this shift. The PYMNTS Intelligence report “Financial Scams Are the New Customer-Churn Crisis for Banks,” commissioned by Block, found that in 81% of successful scams, criminals impersonated trusted authorities, friendly strangers or personal contacts. Authority impersonation alone accounted for 55% of reported incidents, underscoring how social engineering continues to serve as a dominant attack vector.

Speed further complicates detection and mitigation. Nearly two-thirds of scam victims authorized payments within 24 hours, with many transactions approved in shorter timeframes. As instant and near-instant payment rails gain traction, the interval between deception and funds movement has narrowed.

These dynamics elevate identity verification from a compliance obligation to a core fraud prevention mechanism.

Industry announcements over recent months illustrate how firms are repositioning identity technologies within payment flows. Visa’s partnership with Proof, for example, is designed to strengthen digital ID verification across high-value and high-risk payments.

The emphasis reflects a broader architectural shift. Rather than treating identity checks as isolated onboarding steps, networks and platforms increasingly seek to embed verification directly into transactions, where risk signals can be evaluated in real time.

Visa executives have framed this evolution as a technological contest.

“The only way to fight bad AI is with even better AI,” Michael Jabbara, senior vice president and head of payment ecosystem risk and control at Visa, told PYMNTS.

The statement captures the emerging consensus that defensive systems must advance at least as quickly as adversarial capabilities.

Bolt’s selection of Socure similarly signals movement toward transaction-level identity intelligence. The integration uses Socure’s Identity Graph and predictive risk signals to help distinguish legitimate consumers from manipulated or synthetic identities at checkout.

Cloud and infrastructure providers are also entering the conversation. Google’s partnership with Entrust highlights growing alignment between identity verification specialists and large-scale technology platforms. Across these initiatives, the strategic objective remains to increase identity confidence without introducing unnecessary friction.

Evidence suggests that measurable improvements are occurring, albeit unevenly. PYMNTS Intelligence found that nearly 94% of global identity platform users reported that know your customer and know your business processes have become easier over time. Recovery experiences, in turn, influence trust. Among consumers who regained most or all losses, 90% expressed confidence that their institutions would help prevent future scams.

The data and market activity indicate that identity verification is increasingly functioning as connective infrastructure across fraud prevention, payments security and customer experience. As instant payments accelerate and AI-enabled scams proliferate, verification is evolving into a persistent, transaction-linked defense layer.

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