AI accelerates identity fraud as firms overestimate defences

Signicat has published research revealing a significant increase in identity fraud across European businesses, highlighting a gap between rising fraud rates and organisational confidence in countering such threats.

Conducted in collaboration with Sapio Research and Red Goat Cyber Security, the study canvassed insights from over 900 fraud decision makers across nine European countries, focusing on sectors including payments, banking, insurance, gaming, and automotive. The scope of the report included organisations from the UK, Denmark, Finland, France, Germany, the Netherlands, Norway, Spain, and Sweden.

The findings indicate a challenging environment for European businesses, with 59% of participants reporting an uptick in identity fraud attempts compared to the previous year. On average, respondents estimated that approximately one in five (19%) of all transactions are fraudulent, with related losses and prevention costs impacting an estimated 22% of annual business revenue.

Despite the escalation in fraudulent activity, the report finds that a majority—74% of organisations—remain confident in their ability to defend themselves against identity fraud. This confidence appears notably at odds with the evidence that only 45% of those surveyed are actively measuring the impact of identity fraud on their operations. Additionally, 47% admitted to not consistently tracking fraud, underlining a substantial gap in visibility and analytics within businesses.

Pinar Alpay, Chief Product and Marketing Officer at Signicat, commented on the challenges highlighted by the research: "This research highlights a worrying trend: businesses trust their ability to fight fraud, yet don't truly understand where or how it's hurting them. The first step in fighting back is to understand the threat—how it is targeting your business and where it is seeing success. Without that knowledge, businesses are fighting blind."

The report also delves into the tactics employed by fraudsters. ID document forgery was found to be prevalent across all industries, with 71% of respondents acknowledging the use of artificial intelligence (AI) in most fraudulent activities targeting their organisations. The research notes that while attackers increasingly use AI to execute attacks at scale and with greater sophistication, they are not necessarily inventing new techniques but rather enhancing standard approaches with technological capacity.

Account takeover and social engineering were identified as the most financially damaging forms of attack. These methods often succeed by exploiting weak customer security practices, and detecting such fraud is complicated by the fact that affected transactions may seem legitimate until flagged by customers.

The influence of AI extends beyond offensive tactics. The report states that 90% of organisations believe their adoption of AI is helping them keep pace with evolving threats. However, 80% of respondents also agreed that efforts to counter fraud often drive fraudsters to simply adapt and change their methods, reflecting a pervasive sense of helplessness within the business community.

Lisa Forte, Partner at Red Goat Cyber Security, addressed the current evolution of identity fraud in the report's foreword: "The pace at which identity fraud is evolving is unlike anything we've seen in recent years. What was once the domain of opportunistic criminals has become a sophisticated, scalable and worryingly accessible business—often powered by the same artificial intelligence tools driving innovation across legitimate sectors."

Forte continued: "Confidence is a dangerous attitude to have in cybersecurity and fraud; account takeover and Synthetic ID fraud aren't abstract threats. They're happening now, and they're targeting the same businesses that believe they have strong controls in place."

The study highlights differences in the prevalence and methods of fraud between countries and sectors, noting that regular and accurate tracking of fraud instances remains inconsistent across the industry. Many organisations have yet to develop comprehensive visibility into where and how fraud affects their operations, which, according to the research, may jeopardise effective risk management and response strategies.

Signicat's report underscores the rapidly shifting landscape of identity fraud and the varied readiness of European businesses to respond, with many confident yet lacking sufficient measurement and monitoring of the threat.