Countering Synthetic Identity Fraud in Banking

In this article

We examine how synthetic identity fraud – now the leading financial crime across banking and fintech – threatens digital trust and how Zero Trust identity strategies can turn resilience into competitive advantage. The challenge is clear: evolve the identity strategy or risk irreparable damage to both revenue and reputation.

Eroding Trust: The Cost of Synthetic Identity Fraud

Synthetic identities – fabricated personas built from a blend of real and fake data – are no longer anomalies. They now underpin a wide array of scams across consumer and business lending. As of 2024, synthetic identity fraud has ballooned into a $3.3 billion problem for U.S. lenders alone. These “customers” are not who they claim to be. They slip past onboarding controls, nurture fake accounts, and exploit gaps in traditional verification frameworks.

According to Entrust’s 2025 Identity Fraud Report, the financial sector remains the most-targeted for synthetic identity attacks. Cryptocurrency fraud alone accounts for nearly 10% of these cases, followed by the lending sector at around 5%, and traditional banks close behind at another 5% (Entrust).

While the financial industry bears the brunt, synthetic identities are an escalating threat across all industries as digital transactions expand. This erosion of identity integrity creates more than just financial loss. It corrodes confidence between institutions and customers, exposing weaknesses in verification systems and damaging long-term trust.

Synthetic Identities Go Corporate

Fraudsters are no longer limiting their schemes to individuals. Increasingly, they are fabricating or hijacking entire businesses. As more banking, payments, and credit processes move online, criminals have evolved toward sophisticated, longer-play tactics.

Synthetic business identity fraud now involves creating fake business entities using real or fabricated details – or piggybacking on legitimate but dormant companies – to obtain loans, open accounts, or launder funds undetected.

These business-level identities often appear legitimate on paper, blending tax IDs, addresses, and company records that pass standard checks. Without continuous identity assurance and deep verification, they can easily infiltrate financial ecosystems.

Treating Trust Like Currency

At Cloudcomputing, we believe trust must be treated as a high-value currency. It is earned through proof, protected with rigor, and spent carefully. Financial institutions that adopt this mindset transform identity from a static checkbox into a living, continuously validated asset.

Trust is no longer a binary state granted at onboarding. It must be dynamic, scored, and continuously re-evaluated. When institutions view trust as currency, they begin investing in systems that confirm identity across the lifecycle—and only extend credit or privileges when that trust is sufficiently earned.

Zero Trust = Real Trust

Zero Trust isn’t just a network architecture. It’s a strategy for managing identity risk in an era of deception. A Zero Trust approach assumes nothing, verifies everything, and constantly reassesses risk signals. For synthetic identity threats, this posture is essential.

By implementing Zero Trust for both workforce and customer identities, banks enforce contextual access policies, verify behaviors over time, and identify anomalies before they become fraud. It ensures that trust is never granted by default, and that every transaction reflects a validated identity.

Making Trust Measurable

Fraudsters have grown more patient and strategic. They often “nurture” synthetic accounts by making legitimate payments over time to build positive credit histories before executing larger frauds. Detecting these long cons requires a deeper look at behavioral and relational data.

Credit bureaus and financial institutions must go beyond surface-level verification. The details matter: according to TransUnion, 39% of synthetic identities are linked to no relatives – a rate 5.2 times higher than in the real population. These missing social and behavioral signals expose patterns that human reviewers might overlook but advanced analytics can detect (TransUnion).

Modern identity systems, enhanced with AI and machine learning, can analyze these gaps at scale, surfacing subtle inconsistencies that reveal synthetic behavior early in the lifecycle.

The ROI of Trust-Centric Identity

With synthetic fraud inflicting billions in losses, investments in identity assurance generate measurable value. Stronger identity proofing, enriched signal analytics, and Zero Trust IAM programs help institutions:

• Reduce fraud losses and false approvals
• Strengthen regulator and auditor confidence
• Increase accuracy in onboarding and credit decisioning
• Preserve reputation and customer trust

Trust becomes a measurable security posture. Each detected synthetic identity translates to avoided losses and higher confidence in the institution’s digital integrity.

Trust as a Competitive Advantage

Organizations that secure identity at every layer are reducing risk, and also reinforcing customer loyalty. In digital banking, reputation is fragile. Customers stay with institutions that prove they can safeguard personal and business identities beyond accounts.

A modern identity strategy grounded in Zero Trust, powered by analytics, and designed to quantify trust over time will define the next generation of leaders in financial services. In the battle against synthetic identities – individual or corporate – those who protect trust best will lead the market.