A new study forecasts a huge leap in the scale of fraud by the end of the decade driven by a surge in the use of synthetic identity fraud.

Synthetic identity fraud is rapidly becoming one of the most damaging threats to the UK’s financial sector. Unlike traditional identity theft, synthetic fraud combines real and fake data—such as a valid National Insurance number and a made-up name—to create a new, seemingly legitimate profile.

Research by fintech and payment market experts Juniper Research predicts the surge in fraud is set to be driven by an evolution of fraud techniques such as synthetic identity fraud, which is when identities are created using a mix of real, stolen, and fake information to create new personas to open accounts and apply for credit. This fraud innovation is driving a surge in investment in new fraud prevention techniques.

It predicts that the cost of fraud is set to rise from $23 billion in 2025 to $58.3 billion in 2030.

Juniper added: “Synthetic identity threats are becoming more sophisticated; leveraging AI to quickly create convincing new identities based on existing, stolen information. This allows identities to stay under the radar for longer and steal more money from banks. As these identities are partly based on genuine information, they can pass traditional, static fraud checks; forcing financial institutions to upgrade their fraud detection and prevention techniques.”

To combat this, it said banks must verify identity throughout the customer lifecycle. Biometric behavioural analysis, such as typing rhythms or touch patterns, plays a crucial role; identifying anomalies in real-time.

Lorien Carter, senior research analyst at Juniper Research explained banks need to recognise the threat in order to address it.

“The rise in fraudulent transactions has effects reaching beyond fraud loss,” she added. “The recent spate of banks being fined for failing to correctly identify high-risk transactions, such as Monzo, Barclays, and TD Bank, displays that regulators are taking this issue extremely seriously. Financial institutions must increase investment in their fraud detection teams and technology to avoid further monetary and reputational losses.”