Fraud Costs Billions: AI and Human Smarts Fight Back

Industry Faces Staggering $300 Billion Fraud Loss

The financial industry is battling a massive fraud problem, with losses estimated at a shocking $300 billion annually. This ongoing fight against criminals requires constant innovation, as fraudsters are always finding new ways to exploit systems. “Whatever we make, the fraudster will break,” stated Candace Preassenger, Director of Customer Data Security at Elevon, during a recent interview on Finance Insider. She emphasized that staying ahead means evolving with intelligent security measures.

Security: A Growth Tool, Not Just a Cost

Preassenger highlighted a major blind spot for even large businesses: viewing security solely as a compliance expense rather than a strategy for growth. “Security is often seen as a cost of compliance rather than a growth lever,” she explained. Many companies struggle with fraud losses while missing out on potential revenue. They sometimes avoid security measures, thinking they are too costly, when in reality, smart security can help protect and even increase earnings.

High-Value Industries Most at Risk

Industries dealing with high-value items are prime targets for fraudsters. Airlines and hotels, for example, face significant risks because their offerings are lucrative to steal, resell on the dark web, or use for quick cash. “High ticket, high value ticket items… are the most lucrative things to steal, get cash back for and to resell on the dark web,” Preassenger noted. When security isn’t a top priority in these sectors, fraudsters find it easier to succeed.

The Cost of False Positives Doubles the Damage

The sheer scale of fraud is staggering, but the impact of blocking legitimate customers is equally damaging. Merchants trying to stop fraud often tighten their rules too much, accidentally blocking good transactions. These are called false positives. “Merchants are really struggling to block that fraud and in so doing, they’re tightening rules and stopping good transactions coming through,” Preassenger said. These false positives are costing businesses an estimated $600 billion, twice the amount lost directly to fraud. This means businesses are not only losing money to criminals but also to their own overly cautious systems.

Elevon’s Solution: AI Meets Human Intelligence

To combat this, Elevon has launched its Transaction Risk Analysis, which combines artificial intelligence (AI) with biometrics. This system works by analyzing numerous signals, including biometric data, device information, and past behavior patterns, to assess the risk of a transaction in real-time. “AI is something that is supercharging everything. It’s supercharging the fraudsters, but it also supercharges our capability to keep up with them,” Preassenger explained. The goal is to say “yes more safely” to good customers, allowing more legitimate business to flow through while stopping fraudulent activity before it leads to losses.

The Need for Speed and Accuracy

The process of approving or denying a transaction happens in mere nanoseconds. “It’s a nanosecond that you have to allow a good customer to go through and to stop a bad thing happening,” Preassenger stated. The system uses advanced AI and machine learning models, customized for each merchant, to achieve the best possible outcome. This speed is crucial for customer satisfaction, as 40% of customers who are blocked by accident may not return. This leads to losing customers that took significant time and money to acquire.

Frictionless Experiences Drive Customer Loyalty

In today’s digital world, consumers expect smooth and easy transactions. Any friction can ruin the customer experience. “Everybody wants to just go on and buy things and get what they want. The merchant wants the payment, and when there’s friction, it’s not good for anybody,” Preassenger observed. She compared it to the Uber model, where the entire process is designed to be seamless. A bad payment experience can negatively affect a customer’s entire perception of a brand, no matter how good the rest of their experience was.

Beyond Compliance: Security as a Financial Strategy

Stronger security practices are essential not just for meeting regulations but for improving a company’s bottom line. Every declined legitimate customer, or false positive, acts like a hidden tax on growth. When a chargeback occurs—when a fraudulent purchase is later disputed—the cost goes beyond the value of the item. It includes operational expenses, damage to the company’s reputation, and the potential loss of the customer forever. Preassenger estimates that the cost of a chargeback can be at least 1.5 times the value of the original ticket.

AI Governance is Key, Not Just Hype

While AI offers powerful new tools for fraud detection, its implementation requires careful oversight. “There is so much hype around AI, and that it’s going to solve and make everything right. But it’s all about the governance and not the glamour,” Preassenger cautioned. Companies must be aware of increasing AI regulations focused on accountability and transparency. It’s vital to understand how AI-driven decisions are made and to have systems in place to explain them to regulators, boards, and customers. AI should not be treated as a “black box” but as a tool that works best when combined with human intelligence and constant monitoring.

The Power of Human-AI Collaboration

The most effective approach involves integrating AI with human oversight. “You can’t just throw it in and expect it to take decisions and drive things unmonitored, ungoverned, untrained,” Preassenger stressed. The dynamic nature of fraud means that security systems must continuously adapt. The intelligence gathered helps security teams evolve and stay ahead of criminals, but this requires ongoing management and adjustment.

Urgent Advice for Leaders

Preassenger offered a stark warning about the financial impact of fraud: if fraud were a country, it would have the third-largest GDP globally, surpassing nations like Japan. “The leaders that are going to win in 2026 are the ones that sort of grasp that and don’t work in silos,” she advised. Her urgent recommendation for business leaders is to embed security deeply into their payment strategies, seeing it as a critical component rather than just a compliance hurdle. Collaboration between fraud, finance, and growth teams is essential to ensure security supports the entire customer journey and leads to better business outcomes.

Source: Director of Customer Data Security claims 'fraud costs the industry 300 million' | Finance Insider (YouTube)