How to fight fraud in the age of AI

COMMENTARY: The world of fraud today has evolved into a sophisticated, AI-accelerated ecosystem. Our adversaries aren’t just focused on breaching organizations, they’re infiltrating and exploiting the very systems meant to protect us. They can look like us, sound like us, and act like us online.

The latest fraud figures are sobering: U.S. consumers reported more than $12.5 billion in fraud losses in 2024, a 25% jump from the previous year, according to the FTC. Businesses are feeling the effects too, with nearly 60% reporting higher fraud losses year over year, according to new Experian research.

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As fraudsters scale their operations with generative and Agentic AI, security professionals must now identify threats and also anticipate them and respond to them in real-time. Critical gaps still exist between what security teams know they need to combat AI-driven threats, what leadership will invest in, and what consumers are ready to trust. Here’s how organizations can bridge the gap.

AI-powered threats demand AI-powered defenses

AI has fueled a surge in synthetic fraud, deepfake scams, and AI-powered social engineering. These formerly complex tactics have become mainstream.

With the rise of Agentic AI, systems are increasingly capable of making decisions and taking action autonomously. While these capabilities are unlocking tremendous efficiencies for businesses, bad actors can also  repurpose them to orchestrate fraud campaigns that operate 24/7, at scale.

Even as cybercriminals are beginning to leverage AI, many security professionals have yet to deploy it effectively for their best defense. While AI has gotten better at identifying inconsistencies and flagging suspicious activity, only 37% of businesses report using AI in fraud detection despite 72% of leaders anticipating AI-generated fraud as a top challenge by 2026.

Consumers are even more conflicted: only 18% of consumers say they fully trust chatbots, and less than 1 in 4 people say they use them. This gap poses a significant barrier to combating AI-powered fraud, undermining both internal adoption of AI-powered security tools within organizations and the willingness of users to engage.

We now have a new arms race: AI vs. AI. However, both businesses and consumers need to adopt AI more quickly than some are comfortable.

Build confidence through identity verification

Identity verification connects businesses to their customers. Therefore, it’s a critical juncture for rebuilding the trust required to combat AI-driven fraud effectively.

Building this bridge won’t be easy; there’s a vast gap between what businesses offer and what users expect. For example, 85% of businesses believe their fraud controls align with user expectations, but 57% of consumers are still concerned about doing tasks online, and only 13% of consumers feel secure using a new brand. Additionally, many organizations continue to rely on traditional verification tools like passwords and PINs, while consumers say that other methods, including biometrics and behavioral analytics, make them feel safest.

Security professionals must implement a multilayered approach to fraud detection to protect their business and the customers they serve now and in the future. This means augmenting their fraud strategy with additional data sources and advanced identity technologies to better recognize consumers online.

This allows for a seamless and always-on experience, reducing friction without sacrificing rigor. Additional verification methods like behavioral analytics offer companies the ability to detect malicious intent based on what they input, as well as consider how users type, tap, and navigate. Further, the newest behavioral analyses also detect for the presence of malicious bots and aim to distinguish them from legitimate AI agents.

Organizations must also clearly and consistently explain how personal data gets collected, used, and protected. Transparency builds trust, and in an environment where digital confidence is fragile, clear communications remain as critical as capability.

Fraud prevention isn’t a cost center or the late-night concern of IT and security professionals. It’s a central component of brand trust and, in turn, a critical driver of long-term business success.

When incorporated thoughtfully, AI-forward innovations not only enhance protection, they also offer a powerful opportunity to prove strategic value internally while earning the trust of increasingly wary consumers.

Businesses that embrace AI-driven tools like machine learning and behavioral analytics can gain a strategic advantage in mitigating fraud. By implementing an adaptive, multilayered approach to fraud prevention, companies can create secure and frictionless customer experiences with trust at the core.

Kathleen Peters, chief innovation officer, fraud, Experian

SC Media Perspectives columns are written by a trusted community of SC Media cybersecurity subject matter experts. Each contribution has a goal of bringing a unique voice to important cybersecurity topics. Content strives to be of the highest quality, objective and non-commercial.