Fraud prevention expenses for neobanks and fintechs have skyrocketed by 357% in a year amid rising sophisticated scams, shifting the financial burden from a back-office concern to a core operational challenge.
Fraud is becoming a more expensive line item for neobanks, digital-only banks and fintechs, even as some measures of loss efficiency improve. According to PYMNTS Intelligence, average fraud-prevention spending rose 357% in a year, from $1.8 million to $8.02 million per institution, while average fraud losses climbed more than 250%, from $800,000 to $2.84 million. At the same time, the fraud-loss rate edged down from 0.90 to 0.72 basis points, suggesting that institutions are losing a smaller slice of transaction value but paying much more to hold the line.
The shift reflects a broader change in how fraud is being carried out. PYMNTS said scams in which victims were manipulated into authorising transfers accounted for 22.4% of fraud dollars in 2026, up from 12% a year earlier, while account takeovers using compromised credentials reached 28.2%. Taken together, more than half of fraud dollars now involve either a legitimate login or customer manipulation, compared with 27.6% two years ago. That makes the challenge less about stopping obvious intrusions and more about spotting activity that looks authentic on its face.
That problem is not confined to customer logins. PYMNTS recently reported that Revolut said a fraud attempt involving a legitimate government email domain led to fraudulent requests for customer information, although the company said its systems and customer funds were not affected. The episode underlines how digital banks must judge not only whether a request appears valid, but whether the channel itself can be trusted. In practice, that has pushed institutions to move fraud detection earlier in the process and to lean more heavily on behavioural analytics, device fingerprinting and machine-learning tools.
The industry response has been swift and costly. PYMNTS Intelligence found that behavioural analytics and device fingerprinting are now used by every institution in the survey, while 96% use machine learning. Among neobanks and fintechs using that technology, 91% said it supports a proactive fraud strategy, up sharply from 19% in 2025. The wider banking sector is facing similar pressure: PYMNTS has reported that nearly 70% of financial institutions increased fraud-detection spending year on year, while unauthorized-party fraud, driven by credential theft and account takeovers, now accounts for 71% of fraud incidents and dollar losses. The message is clear enough: for digital banks, fraud prevention is no longer a back-office safeguard, but a core operating cost.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
