The fight against payment fraud is not likely to get any easier this year, and some experts acknowledge it could become even more difficult as artificial intelligence creates new threats.
American consumers and businesses remain prime targets for fraudsters who prey on their victims through schemes such as duplicitous scammer scams, check laundering operations, and synthetic identity schemes. The Genius Act introduced stablecoins for payments and the increasing acceptance of digital assets in the market could provide yet another avenue of leverage.
Even as the payments industry embraces AI for agent commerce, the criminal use of artificial intelligence is expected to skyrocket in 2026, as deepfakes have the potential to make fraudsters more sophisticated. As companies strive for AI superiority, the transition period will vacillate between positive prospects and dangerous possibilities.
“Where there is disruption, there is opportunity,” industry consultant Peter Tapling said of the emergence of AI. “Things are moving quickly, but it’s going to take time,” he said in an interview Monday. He explained that the AI era has rapidly arrived in the industry, but it is still in its infancy.
Classic fraud types, such as check tampering, remain a problem despite President Donald Trump’s policies. last year’s presidential order Forced the federal government to stop sending paper checks. According to , nearly two-thirds of businesses will experience check fraud in 2024, making it the most commonly cited fraud method that year. Latest research on this topic From the Association of Financial Professionals.
Nevertheless, this year the industry will likely focus on new emerging threats. The payments industry is definitely excited about AI-powered agent commerce and the potential to create agents that not only shop but also purchase goods and services on behalf of consumers and businesses. Card networks, processors and fintechs are racing to take advantage of potentially rising payment volumes.
At the same time, AI poses risks to the industry. Criminals have already made great strides in industrializing their fraud schemes and expanding their attacks. AI now makes it possible to target victims with more believable attacks, potentially trying to trick them into sending money under false pretenses.
How AI is benefiting fraudsters
“Bad actors are better at imitating trusted contacts to increase the personalization and persuasiveness of payment fraud,” said Colin Parsons, head of fraud product strategy at a financial software company. Nasdaq Verafin. That’s true even for knowledgeable people, he said.
This sophistication is manifested in fraudsters using synthetic or stolen identities to open accounts. Create a fake bank website to extract customer information. He also explained that he sometimes pretended to be his grandson to deceive elderly people.
“These situations continue to become more and more sophisticated, making it harder for individuals to understand that they are not actually interacting with the person they think they are interacting with through chat, phone calls, and email,” Parsons said in an interview this month.
Forrester analyst Lily Varon notes the evolution of agent commerce and passwords, and says the impact of AI in payments is complicated by concurrent trends occurring in payments. These trends can call into question existing rules around payment authentication, authorization and fraud liability, among other core principles of payment processing systems, Varon said.
“There are several different streams happening at the same time,” Varon said in an interview last month. “AI is improving the quality of deepfakes. [and] “AI tools are being increasingly deployed and easier to create, and while social engineering is the primary vector for fraud, including deep fakes, payment authentication can and will be affected as well,” she said.
Password practices evolve
Varon said this is happening because passwords and passcodes have come to be seen as ineffective. As such, the industry is grappling with the best way to authenticate users as we move toward a future without passwords, which has historically been considered the best way to authenticate users.
This problem is further exacerbated by the concept of agency commerce. Proxy commerce involves shopping and payments by previously questionable bots, now empowered to complete transactions on behalf of consumers.
“While there is a lot of excitement about agent AI and how it will be applied to payments, there is also a lot of concern about how it will be used, in the same way that deepfakes take advantage of generative AI’s ability to process audio, images, and text,” Tapling said.
Biometrics could strengthen defenses
Varon predicts that biometrics will help fill the gap as more service providers and consumers adopt FIDO passkeys. FIDO Passkey is a Fast Identity Online standard linked to FIDO Passkey. A cryptographic key tied to a specific device that is accessed by fingerprint, facial scan, or other physical attribute.
AI also strengthens defenses against fraud by detecting it. “Artificial intelligence allows technology providers and institutions to take advantage of this new technology and use it in a very positive way to identify fraud,” Parsons said.
Tupling made a similar point, saying that AI is being used against fraud both on the front lines of consumer interactions and in the back office. He pointed to Reality Defender, a New York company that uses AI to detect deepfakes. “We are now using AI to identify AI,” he explained. “They built an AI model that senses, ‘Is the video I’m watching a deepfake?'”
Companies are also employing AI, with the help of financial crime software companies like Unit 21, to better track fraudulent transactions, Tupling said. “There are all sorts of ways that AI can be used to give you more signals or strengthen your signals, not just during trading events, but also on the backend,” he said.
Fighting push payment fraud
One of the most pernicious scams that has gained attention in recent years is push payment fraud. These are cases in which criminals trick consumers and businesses into voluntarily sending money to fraudulent accounts. Remittances were particularly difficult to combat because of their voluntary nature.
The case has drawn the attention of members of Congress amid a proliferation of stories of victims facing huge losses from such scams.
The organization has aimed to educate the public Regarding such traps, companies are taking action to upgrade their systems and tools to combat such scams. Concerns are growing as faster payment systems become available.
Since the Federal Reserve launched its instant payment system FedNow in 2023, users have Improvement of such abilities was required. The Federal Reserve announced this month that it is working on anti-fraud upgrades to FedNow.
The central bank has given FedNow users “The ability to verify the beneficiary name associated with the account of the intended payment, according to a January 15 press release.
The central bank is also working on a FedNow pilot program that will allow banks and credit unions using FedNow’s system to “pre-check” recipients’ accounts before sending money through the real-time system, according to the release.
Share information to fight fraud
Concerns about the exchange of information between financial institutions, whether driven by privacy laws, competitive instincts, or other considerations, have long hindered the communication and cooperation that many believe could more effectively stop payment fraud.
federal reserve system Deputy Commissioner for Oversight Michelle Bowman said there are barriers to financial institutions stepping up as a collective front in the fight against fraud.
“When sharing up-to-date fraud prevention information between banks, if some of your data is currently categorized as: [confidential supervisory information] “Disclosure can be prohibited, even though sharing it would make all banks more resilient to new fraud risks,” he said in a Jan. 7 speech in California.
In her speech, she suggested: Focused on regulatory modernizationargues that the federal government needs to change its approach to better address fraud. The Fed is considering ways to better define the instances in which such information may be shared.
Verafin also seeks to help financial institutions share information to combat fraud.
“The main way financial institutions can prevent this type of fraud is to [via individuals] It’s about leveraging intelligence across the network, understanding what’s going on inside the organization as well as outside it, and working together to prevent financial crime,” Parsons said.
