New Delhi | Powered by artificial intelligence (AI), deepfake technology is no longer limited to fake social media videos and online misinformation. This has now emerged as a significant threat to the banking, financial services and insurance (BFSI) sector. The BFSI department said fraudsters are using AI-generated IDs and manipulated videos to circumvent video know-your-customer (KYC) and identity verification processes. Industry experts and cybersecurity experts warn that low-cost, open-source AI models are enabling criminals to carry out increasingly sophisticated financial fraud schemes.
Experts say deepfakes these days are so realistic that they’re increasingly difficult to distinguish from real videos and images. As a result, financial institutions that rely on video-based customer onboarding and authentication are facing a new generation of cyber threats. Fraudsters are reportedly using forged identities, manipulated documents, and AI-generated facial images to impersonate legitimate customers and access financial services.
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Industry insiders say the threat is no longer theoretical. In some instances, criminals have been able to successfully deceive video KYC and insurance underwriting systems, resulting in significant financial losses. In one reported case, a non-banking financial company (NBFC) is believed to have suffered an estimated loss of Rs 150-20 million after a fraudulent application was processed using a manipulated digital ID. Incidents like this highlight how deepfakes are evolving into a powerful tool for organized financial crime.
Technology experts note that many scammers are not using expensive Frontier AI models. Instead, it relies on a small open-source model that can run on commercially available gaming computers. This significantly reduces the cost of creating convincing deepfakes and lowers the technological barrier for cybercriminals. Specialized tools built on these models often circulate through online communities and underground digital networks, making them accessible to a wider range of threat actors.
One method of particular concern is known as deepfake injection. In this technique, pre-generated images or videos are inserted into a device or camera’s feed to fool identity verification systems. Experts have warned that some of these deepfakes can pass liveness checks designed to ensure a real person is physically present during the verification process. Because many digital onboarding systems rely heavily on facial recognition, the ability to bypass liveness detection poses significant security challenges.
Amid growing concerns, India’s cybercrime authorities have issued an advisory warning that criminals are increasingly leveraging AI-driven technology to circumvent existing cybersecurity safeguards. Experts believe that financial institutions need to move beyond traditional identity verification models and implement multi-layered security mechanisms that combine biometrics, behavioral analysis, and advanced fraud detection tools.
Renowned cybercrime expert and former IPS officer Professor Triveni Singh believes that financial fraud using deepfakes could become one of the most serious cybercrime challenges of the next decade. According to him, cybercriminals are no longer limited to phishing links, OTP scams and social engineering calls. They are now combining AI-powered deception with traditional fraud techniques to create highly persuasive attacks that can mislead both customers and financial institutions. He emphasizes that AI-based risk assessments, behavioral profiling, and advanced authentication systems need to become an integral part of video KYC and digital onboarding frameworks.
To combat the growing threat, several technology companies are developing deepfake detection solutions that can analyze images, videos, and documents for signs of tampering. These systems aim to identify synthetic content before fraudulent transactions or account openings occur. However, experts acknowledge that the competition between AI-powered attacks and AI-powered defenses is becoming increasingly intense.
Concerns are further heightened by the recent number of bank fraud cases. According to the Reserve Bank of India’s annual report, frauds reported by the banking industry amounted to Rs 48,021 crore in FY26, an increase of 46.4 per cent compared to Rs 32,803 crore in FY25. While not all of these incidents are directly related to deepfakes, cybersecurity experts believe that emerging AI technologies are likely to play an increasing role in identity-based financial crimes.
Experts further warn that this threat extends far beyond the BFSI sector. E-commerce platforms, quick commerce services, social media networks, dating applications, and digital payment ecosystems are all increasingly vulnerable to deepfakes-based fraud. As AI tools become more accessible, organizations are being asked to strengthen their identity verification procedures, while consumers are advised to remain vigilant when sharing personal documents and conducting identity-related transactions online.
