US banks increase AI spending to tackle USD $12.5 billion fraud

US banks are preparing for an increase in check fraud attempts as the holiday season approaches, with industry research highlighting the ongoing risks and challenges facing financial institutions and consumers alike.

Fraud concerns

According to recent industry surveys, 73% of US financial institutions consider preventing check fraud to be one of the most significant challenges currently facing the sector. This figure rises to 80% among the largest organisations with over 250 employees. In the past year, 77% of banks reported that check fraud prevention has become a higher priority.

Many banks and credit unions face ongoing difficulties in detecting and halting fraudulent activity, with 67% stating that check fraud is among the most difficult forms of fraud to identify and stop. Around two-thirds of institutions have reported an increase in check fraud losses over the last twelve months.

Consumer impact

Surveys of US consumers reveal that over half (54%) have seen an uptick in attempted check fraud during the past year, rising to 72% among those who have previously experienced scams. As the year-end holiday period approaches, 68% of consumers believe that check fraud attempts increase during holiday periods, including Thanksgiving.

Check payments remain widely used in the US, with Federal Reserve figures indicating there are more than 11 billion check deposits annually, representing a transaction value of USD $27.44 trillion. Despite a decline in overall check usage, criminal tactics are evolving. As a result, 77% of consumers believe financial institutions need to do more to protect them from such forms of fraud.

Bank response

Four in five (80%) US financial institutions have increased their investment in anti-fraud measures in response to the growing threat. There is particular focus on adopting advanced technologies, with 84% identifying artificial intelligence (AI) and similar tools as central to addressing the problem. This focus on technology adoption is even higher among larger institutions, at 88%.

The integration of AI into banks' fraud prevention tools is already underway; 82% of institutions say they have deployed AI for security. Organisations that have yet to implement such technologies risk exposing customers to greater risk as criminals become more sophisticated in their methods.

Financial losses

The rise in check fraud contributes to wider fraud losses across the US financial system. According to figures from the Federal Trade Commission, fraud losses reached USD $12.5 billion in 2024. This was an increase of more than USD $2 billion on the previous year.

Some financial institutions have seen significant results from investing in AI. One US credit union reduced its check fraud losses by more than 90% over two years after adopting an AI-based approach, along with a 35% reduction in overall fraud alert volumes and a 15% increase in fraud detection rates.

Industry perspective

"Check fraud may be old-school, but fraudsters are giving it a modern twist. With the holiday season approaching, banks must be proactive. AI is the frontline defence for many banks and financial in institutions. Those that delay, risk falling behind in protecting their customers," said Jason Blackhurst, SVP, Head of Featurespace and Acceptance Risk Solutions, Visa.