Fraud is rapidly escalating across Europe’s financial sector, driven by advancements in artificial intelligence (AI) that have enabled more sophisticated attacks. According to a survey conducted by Signicast across seven European countries, 76% of fraud experts report that fraud is a greater threat now than three years ago, with 66% highlighting AI-powered identity fraud as a significant concern.
The survey, conducted in March and April 2024, reveals deepfakes and impersonation as two of the most common forms of identity fraud. Signicat’s findings show a dramatic rise in deepfake fraud—growing from 0.1% of total fraud attempts in 2021 to 6.5% in 2024, marking a staggering 2,137% increase. Over the past three years, overall fraud attempts in Europe’s financial sector have surged by 80%.
Deepfakes: A Growing Threat to eID Systems
Deepfakes have emerged as the primary threat to national electronic identity (eID) systems, which are designed to allow individuals to verify their identity online securely. However, cybercriminals are now using AI-powered tools to mimic voices and videos with stunning precision, bypassing these safeguards.
These schemes take several forms. Some deepfakes hijack legitimate accounts or create entirely false identities, while others deceive users into authorizing transactions or trick them into entering credentials on fake verification sites. Deepfake-enabled “man-in-the-middle” attacks have also become increasingly common.
The study indicates that 60% of fraud executives view eID fraud as a bigger threat today than three years ago. While eID systems have reduced some types of fraud, they cannot fully prevent AI-based threats that exploit human behavior.
The Rising Costs of AI-Driven Fraud
AI-powered identity fraud is not only more sophisticated but also more lucrative. The Signicat study shows that 42.5% of all detected fraud attempts now involve AI, with nearly 29% of them succeeding. Respondents estimate that 38% of revenue lost to fraud in 2024 was due to AI-driven identity theft.
A parallel analysis by Deloitte projects that generative AI (genAI) will further amplify the scale of fraud. Losses from AI-driven scams could reach $40 billion in the U.S. alone by 2027, with a compound annual growth rate of 32% from 2023 to 2027. GenAI’s ability to produce hyper-realistic images and videos will increase the effectiveness of these scams, making them even harder to detect.
Financial Institutions Step Up Defenses
European financial institutions are ramping up their efforts to counter these AI-driven threats. More than three-quarters of surveyed organizations have formed specialist teams and plan to upgrade their fraud prevention systems. However, only 24% have implemented these defenses so far, with smaller firms lagging behind at 18%. Many organizations expect to roll out new measures within the next year.
Banks and financial service providers are also adopting advanced technologies to stay ahead of the evolving fraud landscape. For example, JPMorgan has integrated AI to streamline payment validation, detect fraud, and improve customer service. Similarly, Microsoft has partnered with Moody’s to develop genAI-powered risk assessment and analytics solutions.
Despite the progress, the delay in deploying effective defenses underscores the need for quicker action to address the rapidly changing threat landscape. With AI-driven fraud becoming a dominant challenge, financial institutions must embrace innovative technologies to safeguard their operations and customers in this new era of cybercrime.
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