More than two-thirds (68%) of UK fintech companies have reported a rise in fraud cases over the past year, according to new data. Nearly two in five firms recorded losses between £1m and £5m, based on findings from identity and fraud prevention platform Alloy.
The data is based on the results of a survey conducted by The Harris Poll on behalf of Alloy. The survey gathered insights from 118 senior decision-makers at UK fintech firms. It found that 79% of respondents reported losing at least £500,000 to fraud in the 12 months leading up to October 2024, with 9% of firms experiencing losses exceeding £5m. Alloy’s State of UK Fraud Report also revealed that 41% of fintechs identified synthetic identity fraud as one of the fastest-growing threats, highlighting the evolving nature of financial crime. Additionally, 65% of fintechs stated that account takeovers had become more frequent, further exacerbating fraud risks.
Concerns over regulatory penalties and reputational damage have taken precedence over direct financial losses for many UK fintechs. According to the findings, 93% of C-suite executives cited compliance risks as the most significant consequence of fraud, ranking them above client losses or financial impact, both at 87%.
Regulatory changes introduced by the UK’s Payment Systems Regulator in late 2024 have placed additional financial burdens on fintech firms. The new rules mandate that both the sender’s and receiver’s payment service providers share the costs of reimbursing victims of authorised push payment (APP) fraud. In response, 97% of fintechs acknowledged the necessity of strong financial crime controls, and 67% noted that compliance with these regulations is driving increased investment in fraud prevention.
“The UK is home to one of the most sophisticated anti-fraud regulatory regimes. However, domestic regulatory innovation cannot solve the problem on its own,” said Alloy’s growth UK, EMEA and APAC head James Baston-Pitt. “This creates challenges for all fintech companies – in particular, those that want to operate internationally or extend their services to non-UK customers. Fintech businesses are negotiating multiple regulatory regimes against a backdrop of AI-driven fraud that moves and adapts faster than regulations can keep up.”
The research highlights that the majority of fraud incidents affecting UK fintechs are linked to organised crime. Nearly three-quarters (73%) of fintech firms reported that fraud events were primarily carried out by criminal groups. A smaller proportion (19%) attributed them to first-party fraud, where customers knowingly commit fraudulent activities. Only 8% of firms identified coerced customers as the main source of fraudulent activity. The rise of deepfake technology and AI-driven fraud schemes was also cited as a growing concern, with fintechs reporting increased difficulty in detecting fraudulent activity.
Investments in fraud prevention increase despite internal challenges
Despite rising fraud threats, many UK fintech firms indicate that their current fraud prevention measures remain inadequate. Among those that feel underprepared, 57% pointed to insufficient staffing, tools, and access to critical data as key challenges, while 43% stated that their existing fraud controls were ineffective.
However, fintech firms are ramping up their defences, with 96% confirming plans to increase fraud prevention investments in 2025. The majority (92%) agreed that fraud prevention efforts result in cost savings that outweigh the expenditure. Identity risk solutions have been highlighted as a primary area of investment for fintechs seeking to curb fraud incidents. Additionally, 78% of fintechs reported that fraud prevention strategies had become a board-level priority, reflecting the heightened urgency to address financial crime risks.
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