Smart Ways Community Banks Can Address Card Fraud

According to data from the Federal Trade Commission, consumers reported losing more than $12.5 billion to fraud in 2024—a 25% increase over the previous year. Consumers aren’t the only victims: The 2025 Conference of State Bank Supervisors Annual Survey of Community Banks found that card fraud was the most common and costliest of all fraud experienced by community banks; 59% of reported fraud cases and 39% of reported losses fell into this category. 

In 2024, a survey by Federal Reserve Financial Services found that incidents with debit cards caused the largest year-on-year increase in fraud losses for financial institutions. Credit card losses were considerably lower, flagging debit cards as perhaps the biggest vulnerability for banks.

The digital problem

With the rise of e-commerce, card fraud is increasingly digital. 

“We’re seeing a shift from traditional card-present fraud to more sophisticated account takeover and synthetic identity-based fraud,” says Scott Anchin, senior vice president of strategic initiatives and policy at ICBA. “Fraudsters are operating in highly organized ways, making heavy use of digital channels and underground sources of authentication and identity data.”

Scammers operate like businesses, using data and AI to move at speed, turning fraud into an assembly-line operation that makes scams more believable, detection harder and losses larger. They exploit stolen data online, test card numbers against merchant systems and use phishing or credential stuffing to hijack accounts.

Tech solutions

AI might be helping fraud to flourish, but it’s also part of the solution. AI and other tools are helping financial institutions to nip fraud in the bud, including real‑time fraud monitoring, machine learning models and multifactor authentication advocacy. 

CPI Card Group in Littleton, Colorado, is one company that offers enhanced fraud prevention technology, including predictive analytics and consortium-based fraud scoring. 

“Predictive analytics helps banks anticipate fraud patterns before they strike,” says Megan Meek, director of digital and integrated solutions for CPI Card Group.

CPI’s platform uses AI and machine learning, which analyzes 50 million card transactions per day using AI-generated fraud models to block attacks in real time. This use of machine learning means the platform can detect fraud patterns earlier than humans can. 

Using this data, CPI Card Group also gives every card a “fraud score,” allowing banks to predict which cards are most likely to be compromised. That allows banks to be more proactive about intercepting fraud before or as it happens. 

“Every fraudulent event risks customer attrition,” Meek says. “By catching compromises early and minimizing false positives, banks keep cardholders confident and engaged. Trust builds loyalty.”

Human solutions

It’s important to remember the key role that humans play in fraud prevention. Staff training can help employees spot synthetic IDs and suspicious disputes, and collaboration with other financial institutions is critical. 

“Community banks are facing the same technically sophisticated threat actors as larger institutions,” says Anchin. “This makes collaborating and sharing information with stakeholders and peers especially important.” 

He advises community banks to share intelligence with local law enforcement and use resources from ICBA and state associations to stay one step ahead of fraudsters. For example, ICBA’s Community platform (community.icba.org) offers a fraud channel for community bankers to share helpful information with peers.

The customer impact

Customer education campaigns raise awareness of phishing and scams, and offering card controls—such as lock-unlock features, spending limits and virtual card numbers—helps customers protect themselves.

Sadly, card fraud tends to be “when,” not “if,” for many customers, so one of the most helpful things community banks can do is resolve card fraud incidents efficiently and in the relationship-first way community banks are known for. 

According to Quavo Fraud & Disputes, which provides AI-enabled dispute management tools to financial institutions, about 650 million disputes are filed each year, and 66% of credit card fraud victims say they would consider switching banks if the resolution process isn’t fast enough. 

Community banks should also make it as easy as possible for customers to dispute fraud. Even though regulators allow banks up to two weeks to investigate a complaint, that can feel too long to customers. Being a victim of fraud is stressful, and the bank that handles a dispute quickly, simply and respectfully will retain customers. 

“The regulatory landscape continues to evolve with active conversations around fraud monitoring, customer authentication, liability allocations, bank-fintech partnerships, and AI,” says Anchin. “Community banks should take care to balance regulatory requirements and supervisory guidance with the relationship-based services they’re uniquely equipped to provide.”

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