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Fraud Becomes a Bigger Cost of Running a Neobank

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Fraud Becomes a Bigger Cost of Running a Neobank

Fraud-prevention spending among neobanks, digital-only banks and FinTechs rose 357%, from $1.8 million to $8 million per institution.

Average fraud losses rose more than 250%, from $800,000 to $2.84 million, even as the group’s fraud-loss rate fell from 0.90 to 0.72 basis points.

Neobanks are expanding fraud defenses as more attacks use legitimate credentials, customer authorization or trusted channels.

Neobanks are spending far more on fraud prevention even as their fraud losses continue to rise.

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Fraud prevention spending among neobanks, digital-only banks and FinTechs jumped 357% in a year, from $1.8 million to $8 million per institution, according to the PYMNTS Intelligence report “Scams Get Personal: Why Banks Pay More to Fight Fraud”. Average fraud losses rose more than 250%, from $800,000 to $2.8 million.

One measure moved in the opposite direction: The fraud-loss rate for these neobanks, digital banks and FinTechs fell 20%, from 0.90 to 0.72 basis points.

For neobanks, the three numbers define the trend. A smaller share of transaction value is being lost, but achieving that result now comes with a much larger prevention bill while absolute losses continue to rise.

Digital banks were already showing elevated fraud exposure. 8 basis points across the full sample. PYMNTS reported at the time that the exposure accompanied the speed and scale of digital-first models.



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