How to prevent identity fraud in fintech: A strategic guide for leaders

For leaders in financial services, understanding how to prevent identity fraud in fintech has become a board-level concern that touches every aspect of the business. It is no longer only about preventing operational losses; it is about protecting the reputation of the organization, maintaining customer trust, and demonstrating resilience to shareholders and regulators. The costs are mounting. Veriff’s 2025 Future of Finance research revealed a 21% rise in fraud attempts year-on-year, with one in every twenty verification attempts involving someone pretending to be someone else. For some organizations, fraud has consumed as much as twenty percent of annual revenue, effectively becoming a hidden “fraud tax” on growth.

In Brazil, the situation is particularly alarming. Fraud attempts have surpassed one million per month in 2025, according to Serasa Experian, with scams ranging from deepfake-enabled impersonations to account takeovers. Kaarel Kotkas, founder and CEO of Veriff, emphasizes the importance of proactive measures: “Our mission is to ensure that real people have access to services, while criminals are stopped in a smart and scalable way, even in the face of increasingly sophisticated threats.”

In this environment, preventing identity fraud in fintech is not simply an exercise in risk management. It is an essential step in securing profitable growth, meeting regulatory obligations, and ensuring the business is positioned as a trusted leader in a crowded market. As Hubert Behaghel, Veriff’s Chief Product and Technology Officer, emphasized during the ID Talk podcast, “It’s about an infrastructure of trust. It’s not discrete capabilities that you plug specifically into different parts of the journey. You need to have this full ecosystem that empowers you to deal with the core of trust.”

“Our mission is to ensure that real people have access to services, while criminals are stopped in a smart and scalable way, even in the face of increasingly sophisticated threats.”

Kaarel Kotkas Founder & CEO Veriff

Why fintech firms are prime targets for identity fraud

The fintech sector has become an irresistible target for fraudsters because of the unique combination of assets and conditions it manages. Financial platforms handle vast amounts of sensitive data and process high transaction volumes at speed, which provides fraudsters with many entry points. The industry is also characterized by rapid innovation, where the adoption of new technologies sometimes outpaces the development of robust compliance frameworks. This speed, while a competitive advantage, can leave temporary gaps in defenses that criminals exploit.

Furthermore, fintech firms often operate across multiple jurisdictions, facing complex regulatory landscapes such as GDPR in Europe, DORA for operational resilience, and the US Bank Secrecy Act. Taken together, these factors mean that fraudsters see financial services as both lucrative and vulnerable, while leaders must strike a delicate balance between scaling their businesses and maintaining airtight defenses.

Understanding how to prevent identity fraud in fintech requires addressing these vulnerabilities head-on with a combination of advanced technology, strategic planning, and industry collaboration.

The evolving nature of identity fraud in fintech

Fraud is no longer a matter of isolated phishing emails or crude attempts to access stolen accounts. Instead, it has become industrialized and is increasingly supported by advanced technologies. Fraudsters now engage in account takeovers using breached data, create synthetic identities by blending real and fabricated details, and operate identity farms where thousands of fake profiles are produced at scale.

Perhaps most concerning for leaders is the rise of “authorized fraud,” in which criminals coerce or trick individuals into passing legitimate verification checks on their behalf. With the emergence of AI and deepfakes, this type of fraud is becoming harder to detect, eroding confidence in even the most trusted verification processes. As Markiyan Matsekh, Veriff’s Director of Product and Expansion, noted, “The AI is making wonders there,” describing how processes that once took days or weeks can now be accelerated to minutes, improving both costs and user experience.

At the same time, entirely new attack vectors are emerging:

• LLM-generated synthetic documents: Large Language Models (LLMs) can now generate highly convincing fake documents—such as IDs, bank statements, or utility bills—at scale, bypassing basic document verification and supporting synthetic identity schemes.

• Injection attacks on mobile SDKs: Fraudsters exploit vulnerabilities in mobile software development kits to intercept or alter verification data in transit, undermining the integrity of authentication.

• Real-time face-swap streaming: Instead of static deepfakes, attackers are now using real-time face-swap technologies to impersonate users during live verification sessions. This makes detection significantly more difficult, as traditional liveness checks were not designed to handle continuous AI manipulation.

In Brazil, the use of AI in fraud prevention is already widespread, with 69.5% of companies leveraging it to combat scams, and another 16.5% in the process of implementing it. However, the sophistication of attacks continues to grow, with 60.5% of respondents reporting an increase in AI-driven scams. Andrea Rozenberg, Veriff’s general manager in Brazil, highlights the importance of a multi-layered approach: “Biometrics is a powerful tool, but it cannot work alone. Authentication needs to combine multiple layers of verification and risk intelligence to truly protect the global financial ecosystem.”

Proven strategies for preventing identity fraud in fintech

If you’re wondering how to prevent identity fraud in fintech, the good news is that financial services organizations are not powerless. Many leading firms have begun to turn fraud prevention into a strategic advantage. Surveys conducted by Veriff show that eighty-three percent of financial services organizations have already adopted identity verification and biometric tools, and more than eighty percent plan to increase investment in these technologies over the coming years.

At the same time, fraud professionals recognize that while artificial intelligence is driving new forms of attack, it is also their most powerful defense. Nearly two-thirds of US respondents report already using AI and machine learning in fraud prevention, with many others planning adoption within the next year. The combination of biometric authentication, continuous reauthentication across the customer lifecycle, machine learning algorithms capable of detecting subtle anomalies, provides a multilayered defense that is both scalable and effective.

Veriff’s own CrossLinks and Risk Scoring approaches are examples of how networks of fraud can be uncovered across industries and geographies—capabilities that no single business could develop in isolation. As Matsekh explained, “Once you can start sharing also this data with some of your other industry peers and consortium, then you start seeing, okay, somebody else has seen either this device or this face or some of these attributes. Then it starts seeing a lot more value.”

At the same time, industry-wide data sharing must be carefully balanced against privacy and antitrust considerations. Open exchange of sensitive data between competitors risks raising compliance concerns unless robust safeguards are in place. This is where data-anonymization techniques, purpose limitation, and governance models become critical:

• Data anonymization and pseudonymization: Techniques such as hashing, tokenization, and differential privacy allow businesses to contribute fraud intelligence without exposing identifiable customer data. This ensures insights can be shared across ecosystems while maintaining compliance with data protection laws like GDPR or LGPD.
  
• Purpose limitation: Shared datasets must be explicitly restricted to fraud prevention and risk intelligence use cases, preventing “function creep” where data might be repurposed for marketing or competitive advantage. Clear contractual and legal frameworks can help enforce this boundary.
  
• Governance models and neutral intermediaries: Effective consortiums often rely on trusted third parties or industry associations to manage the shared infrastructure, ensuring no single participant gains disproportionate access or control. Transparent governance builds trust and reduces antitrust risk.
  

Currently, solutions exist that can identify manipulated images, perform advanced biometric analysis, detect abnormal behavior patterns, and strengthen user authentication in real time, making artificial intelligence the primary shield against fraud. Andrea Rozenberg reinforces this point: “With the increasing sophistication of attacks, the expectation is that, in the coming years, technologies such as deepfake detection, continuous authentication, and real-time identity verification will become even more strategic for protecting businesses and consumers.”

Best practices for fintech leaders to prevent identity fraud

For senior executives, preventing identity fraud in fintech must be approached not only as a technical priority but as an enabler of growth and competitive differentiation. Organizations that treat fraud merely as a compliance requirement often find themselves on the back foot, responding to incidents rather than preventing them. By contrast, firms that position fraud prevention as a strategic driver can reduce losses, improve conversion rates, and deepen customer loyalty.

This means demanding measurable outcomes from technology partners, insisting on case studies and proof points, and investing in solutions that scale with the business. It also means embedding fraud prevention into the company culture—through regular security audits, employee and customer education, and ongoing collaboration with cybersecurity experts. When handled this way, identity fraud prevention strengthens not only security but also the company’s public image, signaling to customers, investors, and regulators that the organization is both innovative and trustworthy.

Compliance as an opportunity in preventing identity fraud

The compliance landscape in financial services is often described as a burden, but for leaders who think strategically, it can be a differentiator. Frameworks such as GDPR, the Digital Operational Resilience Act, and the Bank Secrecy Act are designed to protect consumers and safeguard financial systems. Meeting or exceeding these requirements demonstrates seriousness about risk management and positions a company as a credible, trustworthy partner in the eyes of regulators and customers alike.

Moreover, as new privacy laws continue to emerge across jurisdictions, companies that have invested early in secure, scalable fraud prevention solutions will find it easier to adapt. For enterprise executives, regulatory compliance should not be seen as an obstacle but as an opportunity to strengthen reputation, reassure investors, and open doors to new markets.

Building long-term trust and growth in fintech

Ultimately, the role of the senior leader is to ensure that the business grows profitably while maintaining the trust of all stakeholders. Preventing identity fraud in fintech is central to this mission. The questions executives must continually ask are deceptively simple: Is this customer real? Can they be trusted? And will they remain trusted over time?

By ensuring that these questions are answered at every stage of the customer journey, organizations can protect themselves from immediate risks while also laying the foundation for long-term growth. Companies such as Webull, Blockchain.com, and Raenest have already demonstrated that effective fraud prevention can simultaneously reduce losses, boost conversion rates, and streamline compliance across multiple markets. These are not just cost savings—they are tangible examples of how security, trust, and growth can reinforce one another.

For leaders, the choice is clear. In a world where fraudsters are using AI and deepfakes to scale their attacks, standing still is not an option. By investing in identity verification, biometrics, and AI-powered fraud prevention, fintech companies can not only protect themselves but also differentiate in a competitive market. As Andrea Rozenberg aptly stated, “The combination of AI verification, biometrics, and continuous authentication is essential to building secure and trustworthy experiences.”