Definitions of fraud are wide-ranging, but most center on scams involving monetary losses. Consumers reported to the Federal Trade Commission that they lost more than $12.5 billion to all types of fraud last year, a 25% increase over the prior year. That’s likely the tip of the iceberg: Just two in 100 victims with losses of less than $1,000 told the agency. So did just 6.7% of victims with average losses of over $1,000.

Of course, notifying a government agency or law enforcement isn’t the same thing as telling financial institutions. And surprisingly, recent data on that is scarce. A pilot study by the Stanford Center on Longevity and the FINRA Investor Education Foundation published before rise of artificial intelligence became a new weapon for fraudsters found that only 15% of victims notified their bank or credit card company. Meanwhile, most U.S. adults today have been a victim of an online scam or attack, with nearly three in four experiencing credit card fraud, ransomware, online shopping scams or similar scams.

That’s a big loss for the financial services industry, whose stability depends on trust. The reason: How a financial institution handles a scam incident helps determine whether an affected customer stays or bolts to a competitor. And if a bank, investing website or other financial institution doesn’t know a scam took place, it can’t help that victimized customer, maintain their trust or strengthen its anti-fraud defenses. If a consumer reports the scam but doesn’t trust their bank to make things right, their trust further collapses.

A PYMNTS Intelligence report last month found that financial scams have become a systemic trust challenge for financial institutions, extending far beyond being just a personal nuisance for consumers. The report, commissioned by financial technology firm Block and based on a September survey of 15,110 United States consumers, found that nearly four in 10 U.S. households have fallen victim to financial scams in the past five years.

Two Kinds of Losses

Whether they’re bogus gift-card and tech-support schemes or investment and Social Security frauds, the individual losses range from hundreds to thousands of dollars. For financial institutions, the losses have another dimension: consumer trust and confidence.

That’s because the way a bank handles the funds recovery process after a customer reports a scam dramatically impacts customer confidence and retention. Consumers who successfully recover their funds report dramatically higher confidence in their banks. Conversely, those who don’t report often choose to leave their banks altogether. BioCatch, a fraud prevention company, cites data from credit scoring company FICO showing that 45% of fraud victims stopped using the bank or financial institution where the crime occurred. Nearly one in four canceled their credit cards.

Half of financial institutions in the PYMNTS Intelligence study report that fraud had a negative impact on customer loyalty. More than four in 10 say they suffered brand damage as a result.

It gets worse. Nearly half of financial institutions (48%) say the loss of customer trust due to fraud has cost them new business opportunities. Nearly as many (47%) report also experiencing operational disruptions as a result of fraud, while 36% said the experience reinforced the need for new technologies to restore resilience and strengthen defenses.

What’s clear is that consumes who report scams to their financial institutions give them the opportunity to intervene. That makes the post-incident recovery journey the true test of trust, determining whether the customer relationship endures.

But first, banks have to get scam victims to come forward.

Shame on Me

Social psychologists know how cognitive biases—unconscious deviations from rational thinking—shape behavior. What’s known as the attribution bias centers on the tendency to overemphasize personal factors (personality traits, intentions and abilities) and underestimate situational, external factors (the stuff happening to you). For example, when it comes to financial fraud, people may tend to believe that a victim was not smart enough or was not paying close enough attention, rather than consider external factors like having been intentionally targeted.

A survey by the Financial Industry Regulatory Authority, the self-regulatory organization that oversees U.S. stockbrokers and brokerage firms and seeks to protect investors and market integrity, found that one-third of Americans agree with the statement, “Honestly if you fall victim…a lot of that is on you.” Cue the shame. A 2024 study found self-blame common among victims, citing one surveyed as saying, “[I felt] humiliation, embarrassment, stress, anger, sadness, like, every emotion going really. And then once you start telling people, you either get like, ‘oh, my God, you okay?’ or you get, ‘oh, I didn’t think that would happen to you’.”

Not just victim-blaming, humiliation and self-shame are at play. The PYMNTS and Block study found that over one-quarter of victims who did not report scams to their banks say that they didn’t even know they could do so.

A big shift in the scam landscape involves the sharp rise of what’s known as unauthorized-party fraud. Also called third-party fraud, this involves an external person or organization that steals or fabricates a customer’s identity. The other type is first-party, or first-person, fraud, when someone deliberately misrepresents themselves in pursuit of financial gain, such as lying on a mortgage application. Unauthorized party fraud, is, of course, tied to feelings of shame. Third-party fraud, typically involving stolen credentials, accounted for 71% of total losses from fraud in 2025, a nearly 25-point increase over 2024, the PYMNTS study found.

Both the frequency of financial scams and the average size of financial losses are increasing rapidly, the PYMNTS report found. So, too, is the level of sophistication exhibited by fraudsters, enabled by artificial intelligence and the relative anonymity of crypto transfers.   Nearly half of financial institutions (46%) report that the sophistication of fraud schemes has increased sharply over the past year, up from 35% in 2024.

It all sounds a wake-up call for financial institutions. Banks, credit card companies, insurers, platforms catering to investing, payments and crypto, and other financial institutions that understand why scam victims under-report incidents can bolster their monitoring and detection tools, proactive customer engagement and targeted education to minimize fraud’s odds of success.