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Report Probes Just How Sophisticated and Pervasive Fraud Has Become

BOSTON–Fraud threats facing credit unions are becoming more sophisticated and pervasive as digital banking expands and artificial intelligence tools enable increasingly complex attacks, according to new research and analysis from PYMNTS Intelligence. 

The report said fraud has evolved from isolated incidents into a “persistent, systemwide threat” that affects every stage of the member journey, from onboarding and authentication to transactions and account servicing. 

According to the report, fraudsters are increasingly using coordinated, multichannel schemes that challenge traditional fraud detection and response systems. PYMNTS Intelligence said attackers are no longer exploiting single vulnerabilities but are instead orchestrating broader campaigns involving impersonation, credential theft and unauthorized transfers. 

The Findings

Among the report’s findings, according to PYMNTS:

  • One in 10 consumers encountered card fraud during the past year.
  • Most fraud incidents occurred online and often involved credential sharing, impersonation schemes and unauthorized transfers.
  • Cybersecurity and fraud ranked as the top concern for 56% of credit unions for the second consecutive year.
  • Nearly half of financial institutions reported increasing fraud levels
  • Approximately 77% of institutions experienced at least one unauthorized network access incident during the past year.
  • A majority of consumers — 82% — said security is the primary factor influencing their payment method choices. 

Widened ‘Attack Surface’

The report said expanding digital services have widened the “attack surface” for credit unions, particularly where institutions rely on disconnected systems and fragmented workflows that can create blind spots between channels. Those gaps can limit the ability to identify fraud patterns quickly enough to stop attacks in real time, according to PYMNTS Intelligence. 

Artificial intelligence is also accelerating the sophistication of fraud, the report said. Generative AI tools are enabling criminals to create more convincing synthetic identities capable of bypassing traditional verification systems. Fraudsters are increasingly able to simulate legitimate user behavior, making fraudulent activity more difficult to distinguish from authorized activity. 

“As fraud evolves, so too are member expectations,” the report stated, noting that members increasingly expect real-time protection, proactive communication and seamless fraud prevention without disruptions to their banking experience. 

Quality of Response Affects Loyalty

PYMNTS Intelligence said the quality of fraud response can significantly affect member loyalty. Consumers who reported strong fraud resolution experiences were more likely to increase confidence in their financial provider and adopt additional products and services, according to the analysis. 

The report said real-time fraud detection capabilities powered by AI and machine learning are becoming essential tools for credit unions seeking to reduce losses and improve member experiences. Integrated systems that combine data from card, digital and branch interactions can provide a more complete view of member behavior and improve detection accuracy, the report said. 

The analysis also highlighted growing reliance on partnerships and shared fraud ecosystems. PYMNTS Intelligence cited the recently launched Risk Mitigation Ecosystem from Velera as an example of a cloud-based, multilayered fraud prevention platform using AI and unified data across channels to detect fraud in real time. 

Recommendations Offered

PYMNTS Intelligence outlined several recommendations for credit unions modernizing fraud defenses, including:

• Adopting coordinated, enterprise-wide fraud detection and response systems.
• Implementing real-time, AI-driven fraud monitoring tools.
• Eliminating data silos across channels.
• Enhancing real-time member communication and fraud alerts.
• Leveraging technology and ecosystem partnerships for broader fraud intelligence and tools. 

The report concluded that credit unions treating fraud prevention as an enterprise-wide capability rather than a back-office function will be better positioned to maintain member trust and support long-term growth.

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