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While identity fraud losses have stabilized and scam losses have declined, new account fraud has surged, fueled in part by AI, which “is reshaping the fraud landscape,” says Javelin Strategy & Research’s 2026 annual identity fraud study, The Illusion of Progress.

“Artificial intelligence is at the center of these shifts in fraud and scam losses,” the report says. “Financial institutions are increasingly investing in AI and autonomous technology to improve fraud detection,” but, “at the same time, fraudsters are adopting the same tools, at faster paces, to broaden their reach with more convincing scams and efficient fraud schemes.”

“To fight the rising misuse of AI by criminals, financial organizations need to update fraud controls, enhance collaboration, and treat fraud detection as an ongoing process rather than a one-time decision,” the report says.

The study, conducted with support from TransUnion, Fiserv, Plaid, and Mastercard, reported that combined fraud and scam losses totaled $38 billion in 2025, a $9 billion reduction from 2024. The number of victims also decreased by four million, affecting 36 million in 2025.

Traditional identity fraud losses remained steady at $27.3 billion in 2025, affecting 18 million victims, the report says, with the number of victims increasing across all fraud types.

New-account fraud experienced the sharpest rise in the number of victims, a 31 percent increase from 4.2 million in 2024, to 5.4 million in 2025, suggesting that the stability in reported losses might mask shifts in fraud activity.

Account takeover, which makes up a part of both existing card fraud and non-card fraud, saw an 18 percent increase in victims from 5.1 million in 2024, to 6 million in 2025. Reduced losses do not translate to reduced risk.

Scam losses fell 45 percent year-over-year, from $19.5 billion in 2024 to $10.7 billion in 2025. This decline is attributed to an increase in scams that don’t result in immediate monetary loss but can lead to future fraud or account compromises.

Suzanne Sando, lead analyst in fraud management at Javelin and the report’s author, emphasized that the decline in scam-related losses doesn’t mean the overall risk has decreased.

“Reduced losses do not mean reduced risk,” Sando said. “A 45 percent drop may look like progress, but scammers are increasingly stealing information instead of money, setting up future fraud that doesn’t show up in today’s loss figures.”

The study highlighted a troubling 31 percent rise in new account fraud, which impacted 5.4 million victims and caused $7 billion in losses. Despite a 41 percent decline in romance scams, they continue to affect vulnerable populations.

Account takeover fraud, while seeing a slight decrease in losses, remained the costliest fraud type, with an 18 percent increase in victims.

“Fraud losses may look stable on paper, but the risk hasn’t gone away,” Sando told Biometric Update. “Without stronger identity, smarter controls, and real intelligence sharing and collaboration, today’s progress will prove to be nothing more than a temporary pause.”

Sando added that “we’ve reached an inflection point where fraudsters are outpacing banks in AI adoption. Fraudsters don’t have to worry about the same compliance or regulatory guardrails that financial services organizations do, and that gives them an advantage that financial services cannot afford to ignore.”

The report also points to a significant shift in consumer behavior, with many increasingly suspicious of fraud alerts from financial institutions.

“Despite decreases in scam losses …  the rise in AI-fueled bank impersonation and purchase scams have made consumers skeptical of legitimate communications from their financial institutions,” the report says, noting that “many consumers now hesitate to engage with fraud alerts, unintentionally exposing themselves to serious fraud risk, simply because they are unsure of the alert’s legitimacy.”

“The result,” the report says, “is delayed action (or sometimes no action at all), unresolved fraud, and increased consumer frustration and confusion.”

As AI-driven scams grow in sophistication, consumers are more likely to distrust messages from their banks. In fact, 55 percent of consumers who received a fraud alert from their financial institution chose not to respond, fearing that the alert itself might be a scam.

AI is being used by financial institutions to enhance fraud detection, but concerns are mounting that current fraud controls may not be sufficient to cope with the rapidly evolving threat landscape.

Financial institutions are urged to implement continuous monitoring and collaborate more effectively to address AI-driven fraud.

The study serves as a wake-up call for financial institutions, urging them to strengthen fraud defenses and adapt to the changing realities of fraud driven by AI.

Last November, Javelin said “the fraud landscape in 2026 and beyond will experience significant changes due to … rapidly evolving mule activity, the importance of distinguishing between agentic commerce bots and malicious automation, and the imminent threat that phantom hacker scams pose to consumers across all demographics.”

“These trends require financial institutions to be flexible and willing to adapt to new technologies that provide stronger defenses against some of the costliest forms of fraud and scams.”

Last month the company warned that “escalating concerns about cyberattacks linked to Iranian-backed attackers and hacktivists put U.S. banks and other critical infrastructure sectors on high alert.”

The company also said that “criminals have set their sights on vulnerabilities during the payment transaction process through the growing adoption of real-time payments and digital wallets.”

As the line between legitimate and fraudulent activities continues to blur, financial services must keep innovating to stay ahead of fraudsters.