Nowadays, fraud and loss plague the banking business. Despite building up fraud detection systems, some financial institutions still experience fraud. The good news is that several steps have been taken to ensure fraud prevention in banks and are therefore able to detect it well ahead of time. We have discussed some common types of fraud related to the banking sector and tips for fraud prevention. Read on for insights.

Types of fraud in the banking sector

When it comes to preventing fraud, it’s essential that you know the different types of fraud in the banking sector.

  • Credit card fraud: 

Credit card fraud occurs when someone steals or duplicates the information on a credit card and uses it to make purchases. To do this, either the physical card itself is stolen, or the number written on the back of the card is obtained (a process known as skimming). People who may have access to customers’ credit card numbers often perpetrate this type of fraud.

  • Cheque fraud:

Cheque fraud occurs when someone obtains a cheque by stealing it or taking advantage of a victim’s lack of knowledge. An individual may call a bank claiming an insurance claim owes them money; if they can convince the bank representative to grant them access to the account, the fraudsters could withdraw the money from the cheques causing a major loss to an individual.

  • Financial statement fraud: 

A financial statement fraud occurs when someone distorts an organisation’s financial statements to appeal to investors or lenders, resulting in them investing in what appears to be a lucrative investment opportunity based on false information presented by scammers who seek to exploit them financially through false promises about the company’s performance (for example, earnings per share).

  • Phishing:

“Phishing” refers to the type of fraud which occurs when fraudsters send emails that appear like real business messages to access the personal information of individuals, such as Facebook access, Google passwords, etc. Phishing uses phoney websites with identical URLs to trustworthy websites so that uninformed customers would submit login data. Avoiding clicking on email links that seem unverified and unofficial. Don’t give out your login credentials if a stranger emails you. Visit the company’s website to log in.

How can AI help detect fraud in banking?

Artificial intelligence (AI) can help fraud prevention in banks by examining patterns and trends. Many banks utilise machine-learning algorithms to forecast future occurrences. These algorithms can discover trends of fraud and abnormalities that people may miss. AI helps banks discover probable fraud situations.

Many organisations use AI-powered software to analyse bank transactions and spot fraud. This software scans millions of transactions per second for suspicious activity.

In the case of a credit card/debit card, if a person has been making timely payments for years, AI can look at your data and would mark you as a reliable debtor. If a new person tries to open an account or gets approved for a loan, AI can use this information to determine their reliability. This means that when it comes time for them to make payments on their account or for loans, AI has already decided whether or not the individual is likely to pay back.

The same goes for bad behaviour as well! Suppose someone misses their payments on their credit card/debit card repeatedly; in that case, AI might flag them as unreliable based on their frequently missed payment history. However, many advanced improvements are yet to be made to the AI software to make it flawless.

Read more: What is fraud detection?

Tips to follow not to be a victim of fraud in banking

  • Use a credit card instead of a debit card to prevent fraud. When you use your debit card, funds are directly withdrawn from your checking account, so you handle fraudulent charges if someone steals your information.
  • Always keep track of the transactions in your bank account.
  • Be careful when using ATMs, and make sure that no one can see your secret ATM pin while you use the ATM.
  • Protect your PIN and don’t share it with anyone, as this can compromise your security and privacy and lead to identity theft crimes where criminals steal personal information such as SSN, DOB, driver’s license numbers, etc., which they can use for identity theft purposes such as opening accounts in their name and make purchases from your account without your permission.
  • Never give out personal details over email (such as credit card numbers); always check carefully who sent the email before opening attachments or clicking any links in the email.
  • Don’t share sensitive information over unsecured wifi networks like those found at libraries, restaurants, etc.
  • Always look for unusual activity on your accounts, such as unfamiliar withdrawals or purchases. If you see anything suspicious, report it immediately to your bank.


Banks and financial institutions nowadays are making frequent advancements to avoid fraud of any kind. Organisations and banks are starting to use and implement AI-powered fraud prevention in banks. However, customers also need to amp up their knowledge and implement safe ways while doing transactions. We hope the insights shared in the article help you prevent fraud with respect to bank transactions.


How do I know if my account has been hacked?

Check your bank statement and see if there are any unusual transactions you do not recognise. You should immediately notify your bank if you find any suspicious activity in your account. You should monitor email or text messages related to your accounts and report any suspicious messages immediately.

How should I proceed if my card is lost or stolen?

As soon as possible, please report the incident to your bank customer care! Call your bank and ask them to put a hold on any purchases made with that card until further notice. This will prevent anyone from making further purchases with your card until the bank issues you a replacement.

What are the most common types of banking fraud?

Identity theft, credit card theft, and phishing scam are some of the most frequent types of banking fraud. Identity theft involves stealing your name, address, and SSN. Credit card theft includes utilising stolen cards without authorisation. Unauthorised access to a bank account might lead to an account takeover. Phone conversations, emails, and texts may be used to conduct these banking frauds.