Two in three fintechs reporting high volumes of fraud

More than two in three UK fintech companies (68%) are reporting higher fraud volumes compared with one year ago, according to new data published by Alloy.

The research showed that 79% of UK fintechs say they lost at least £500,000 to fraud in the 12 months to October 2024. Two in five (38%) fintechs reported losses of between £1 million and £5 million in that time, and one in ten (9%) lost more than £5 million. 

93% of fintech C-Suite leaders ranked regulatory penalties and reputational damage as the most concerning consequences of fraud – ahead of direct financial losses and the loss of clients (both 87%). 

In late 2024, the UK’s Payments Systems Regulator introduced mandatory reimbursement requirements for victims of APP scams, which require that the sending and receiving organisations each shoulder 50% of the reimbursement cost. As a result, 97% of UK fintechs agreed that it is critical for receiving payment service providers (PSPs) to have robust financial crime controls. Indeed, two-thirds (67%) of UK fintechs say the PSR’s rules are driving overall increased investment in fraud prevention.

James Baston-Pitt, Alloy’s Head of Growth UK, EMEA and APAC, said  “The UK is home to one of the most sophisticated anti-fraud regulatory regimes. However, domestic regulatory innovation can not solve the problem on its own. Fraud is a global, borderless issue. This creates challenges for all fintech companies – in particular, those that want to operate internationally or extend their services to non-UK customers. Fintech businesses are negotiating multiple regulatory regimes against a backdrop of AI-driven fraud that moves and adapts faster than regulations can keep up.”

Three quarters (73%) of UK fintechs report that organised crime rings are responsible for the majority of the fraud events identified by their businesses. Less than a fifth (19%) attribute most fraud to customers acting knowingly (known as ‘first party fraud’) and just 8% believe customers who are coerced account for the most fraud cases. 

Baston-Pitt added “Fraud is a numbers game, and AI is making that game faster, cheaper, and easier for crime rings.

 “But there are data signals that fintechs can track to distinguish the bad actors from genuine customers. The opportunity now lies in using AI and data-sharing to track certain behaviours, establish patterns created by criminal groups and use that knowledge to eliminate them.”

Of UK fintechs that say their organisations are not sufficiently equipped to respond to growing fraud threats, almost three in five (57%) identify insufficient people, tools and access to data as the top reasons for their unpreparedness. 43% say their current fraud prevention controls are insufficient. 

In the face of these deficits, 96% of UK fintechs report that they are investing in fraud prevention in 2025. There’s a consensus that these investments pay off: 92% of respondents agree that the amount of money their organisation saves thanks to fraud prevention outweighs its cost. Fintechs cite identity risk solutions as their top investment for reducing fraud rates. 

Baston-Pitt concluded “Fintechs face a difficult challenge to equip themselves against an enemy that is continually shapeshifting.

“But it’s encouraging to see that the vast majority of firms look to fraud prevention investment as an outlay to support future growth.”