More than 50% of fraud now involves the use of AI, research from Feedzai, a fraud prevention firm found in its new global report.

Generative AI has emerged as a powerful tool for criminals, enabling the creation of hyper-realistic deepfakes, synthetic identities, and AI-powered phishing scams.

Financial institutions are quickly catching on, with nine in ten banks already using AI to detect fraud, and two-thirds have integrated AI within the past two years.

The Feedzai latest report revealed that 90% of financial institutions are combating emerging fraud with AI-powered solutions to safeguard consumers and counter rising threats.

While banks are adopting AI to combat fraud, they face significant roadblocks in implementation, especially ensuring the technology is ethical and transparent.

In contrast, criminals using AI focus solely on exploiting the technology for illegal gain, without the constraints that banks face in adhering to strict ethical and regulatory frameworks.

The Scale of the Issue

The vast majority (92%) of the financial institutions surveyed indicate that fraudsters use generative AI, and only 8% noted that they do not see GenAI being used by criminals.

According to the report, 44% of financial professionals report that deepfakes are used in fraudulent schemes, and 56% of professionals cite social engineering, a set of manipulative tactics used by fraudsters to exploit human psychology and trick individuals into revealing sensitive information, as another significant tactic powered by AI.

Fraudsters are also utilising voice cloning techniques, with 60% of professionals recognising this as a major concern, followed by 59% citing SMS and phishing scams powered by AI to deceive victims.

AI-driven fraud tactics, including deepfakes social engineering, and voice cloning, often result in account takeovers and scams, which, as unauthorised fraud, are generally reimbursable under most circumstances and harder to detect.

While deepfakes alone don’t provide direct access to accounts, they play a critical role in building trust during the entrapment stage of scams, where criminals deceive victims into believing they are dealing with legitimate parties.

“Today’s scams don’t come with typos and obvious red flags—they come with perfect grammar, realistic cloned voices, and videos of people who’ve never existed,” said Anusha Parisutham, Feedzai senior director of Product and AI.

“We’re seeing scam techniques that feel genuinely human because they’re being engineered by AI with that intention. But now, financial institutions also have to deploy advanced AI technologies to fight fire with fire to combat scams.”

Data and Ethics Challenges

Despite AI’s potential and benefits, data management remains a significant challenge for financial institutions. 87% of banks cite data management as their biggest hurdle, with fragmented data sources sources and regulatory constraints slowing AI adoption, particularly among smaller institutions.

As AI becomes essential in fraud prevention, ethical considerations are paramount. The report finds that 89% of banks prioritise explainability and transparency in their AI systems, demanding governance frameworks that ensure fairness, security, and accountability.

“In some ways, AI is like a car. When automakers design a car, they don’t just think about horsepower. They also consider safety features such as seatbelts, airbags, and anti-lock brakes that will keep drivers and passengers safe. The same is true for AI. Models that aren’t designed with trust at the forefront can lead to significant problems for users,” said Pedro Bizarro, Ph.D., co-founder and chief science officer, Feedzai. “

By ensuring that AI decisions are transparent, robust, unbiased, secure, and tested (TRUST), businesses will accelerate innovation and reinforce customer confidence.”

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Banks Fight Back with AI

In the face of criminals using AI, banks also embrace it as a central defence mechanism. The report reveals that 90% of financial institutions use AI to expedite fraud investigations and detect new tactics in real-time.

AI is used for scam detection (50%), transaction  fraud (39%), and anti-money laundering (30%), positioning it as the critical tool in the battle against financial crime.

Looking ahead, AI will not replace human roles but will continue to augment them, the report said.

Forty-three percent of financial professionals report increased efficiency within fraud teams, allowing experts to focus on higher-value, complex fraud cases.

As AI evolves, the future will see even more powerful AI-powered solutions, such as behavioral analytics and real-time anomaly detection, to stay ahead of emerging threats.