Getting ahead of fraudsters requires a new approach

Yinglian Xie is CEO and co-founder of DataVisor, a fraud and risk management platform.

We're at a breaking point with identity. Technology is making it harder to know what's real and what's not. Beyond stolen identity, we now face deepfakes so convincing they can make anyone say or do anything on video. As tools to create fake identities improve daily, our defenses struggle to keep pace. In a digital-first world, this threatens the very foundation of trust.

The perfect storm: Identity threats in today's world

Criminal enterprises now deploy machine learning to analyze stolen data and identify high-value targets, while automated systems probe thousands of accounts simultaneously. Generative AI enables fraudsters to create convincing phishing messages and bypass traditional identity verification systems. The most sophisticated operations build synthetic identities that establish credit profiles and secure loans that appear legitimate until these fictional personas disappear with the funds.

Deepfake technology has raised these stakes dramatically. Voice cloning allows fraudsters to impersonate executives in real time, authorizing massive wire transfers before anyone realizes the deception. The systemic implications — from market manipulation to targeted social engineering — grow increasingly concerning. With AI-powered fraud losses expected to reach $40 billion by 2027, the cost of inaction becomes clearer daily.

Beyond ID verification: Identity as a continuous process

Today's fraudsters easily circumvent point-in-time verifications using synthetic identities, deepfake technology, and compromised devices. A single ID check at onboarding creates a false sense of security while leaving organizations vulnerable to attacks that strike long after initial verification. Even rigorous onboarding procedures become outdated immediately as user behaviors and risk factors continuously evolve. The result is increased friction for customers, which impacts business performance without effectively mitigating fraud.

Although there is an increasing number of solutions for identity verification, organizations are missing the foundational shift: Fraud prevention should focus on how you act, not on who you claim to be. True security requires shifting to a continuous process throughout the customer lifecycle. This means implementing robust transaction monitoring that evaluates not just what users do but how they do it — analyzing typing patterns, navigation behaviors, and transaction histories that create unique "identity fingerprints." Context-aware systems can trigger appropriate verification when behavior deviates from established patterns, stopping fraud while maintaining seamless experiences for legitimate users.

The role of technology in fraud protection

AI-powered systems now identify suspicious patterns before fraud occurs by analyzing massive datasets to establish baselines of legitimate activity. When these systems detect anomalies — unusual transaction timing, atypical purchase amounts, or suspicious locations — they flag potential fraud in real-time, often preventing losses before they occur. These systems continuously evolve, learning from each new fraud attempt to strengthen defenses.

Unlike traditional, static authentication methods, behavioral biometrics work invisibly throughout user sessions, creating distinctive profiles based on typing patterns, mouse movements, and navigation habits. Financial institutions leverage these behavioral signatures to detect when someone other than the legitimate account holder attempts access. When combined with AI, these systems create dynamic user profiles that adapt to gradual changes in legitimate behavior while spotting suspicious deviations.

The most resilient protection frameworks employ multiple layers that work together — knowledge-based authentication, device fingerprinting, geolocation verification, behavioral biometrics, and advanced transaction monitoring. Each layer addresses different vulnerabilities while compensating for weaknesses in other components. The most successful approaches balance robust security with minimal friction, applying additional measures proportionally to identified risk levels.

Act now or pay later

Organizations cannot afford a wait-and-see approach when it comes to addressing today’s fraud. Once credentials are compromised or funds are stolen, the damage is largely irreversible. Post-breach remediation costs far exceed preventative investments, with businesses facing financial losses, regulatory penalties, legal liabilities, and eroded customer trust. Yesterday's security measures are inadequate for today's threats, and today's protections will be insufficient for tomorrow's attacks.

Fraud prevention can no longer exist in organizational silos. The most sophisticated attacks target multiple points in the transaction chain. Effective defense will require collaboration across industries to share threat intelligence and best practices. Industry consortiums and standardized security protocols are essential components of defense against increasingly networked criminal enterprises.

The persistent challenge remains: balancing security with smooth user experiences. Companies leading in fraud prevention achieve this balance through risk-based authentication that adjusts requirements proportionally to perceived threat levels. Low-risk transactions proceed with minimal verification, while high-risk scenarios trigger additional authentication. The most successful implementations make security largely invisible to legitimate users, working behind the scenes without interrupting the customer journey.

Securing trust in the age of uncertainty

Technologies perpetuating identity fraud will only improve over time, worsening the identity crisis. Financial institutions that solely focus on point-in-time identity checks will remain exposed to increasing threats. But now, AI and other emerging, future-proof technologies go beyond identity authentication and bring continuous and comprehensive protection throughout the entire user journey.

The cost of waiting far exceeds the investment required for protection. Organizations that delay implementing robust, always-on fraud protections face not only financial losses but existential threats to their customers’ identities. The path forward is clear: invest in multi-layered fraud prevention today, build collaborative partnerships, and implement solutions that protect without creating barriers to legitimate interactions.