The Rise of AI-Powered Bots in Payment Fraud & How FinTechs Can Protect Themselves

Fintech has transformed how people manage, move, and invest money. But as neobanks, crypto platforms, and payment processors reshape financial services, they have also become prime targets for a new wave of cybercrime: AI-powered bot attacks.

Automated fraud schemes are no longer simple scripts running in the background. Today’s bots are faster, smarter, and more damaging than ever, putting fintech companies at risk of financial loss, reputational harm, data leaks, and eroded customer trust.

The explosion of AI-powered payment fraud

Automated fraud isn’t new, but artificial intelligence has supercharged its scale and sophistication.

Bots can now mimic human behavior, bypass CAPTCHAs, cycle through stolen credentials, and generate realistic fake identities. Industry research paints a stark picture:

• ATO incidents rose by 13% last year compared to 2023.
• Synthetic identity fraud losses exceeded $35 billion in 2023, fueled by generative AI tools capable of creating convincing fake profiles.

This surge in bot-driven fraud is hitting fintech especially hard, where the damage goes beyond immediate financial loss. Companies face chargebacks, compliance penalties, and fraud remediation costs—alongside the far greater cost of damaged customer trust.

The most common bot-driven payment fraud attacks in fintech

Fintech companies contend with a wide range of fraud types, but a few stand out for their scale and impact.

Account takeover (ATO)
Using large botnets, fraudsters launch credential-stuffing attacks, testing millions of stolen usernames and passwords against fintech login portals. Once they gain access, they can drain funds, steal crypto assets, or exploit account-linked services. With ATO fraud expected to reach $17 billion globally by 2025, this is one of the most damaging threats fintechs face.

Carding (Stolen card testing)
Carding bots automate small transactions across thousands of stolen credit cards to test which cards are still active. Once identified, those valid cards are used for major purchases or resold on the dark web. As online payment fraud losses hit $48 billion globally in 2023, carding has become an unavoidable (and costly) risk for fintech payment processors.

Synthetic identity fraud
Fraudsters now blend real and fabricated personal details to create entirely new, convincing identities. With the help of AI, they generate fake documents, selfies, and bank statements, passing KYC checks undetected. Synthetic identity fraud is now the fastest-growing financial crime in the United States, causing billions in losses across neobanks, lenders, and digital credit platforms.

Fake account creation and abuse
Bots also mass-create fake accounts to exploit referral programs, launder funds, or set up “money mule” networks. Beyond direct financial losses, this type of abuse skews growth metrics, overwhelms customer support, and exposes platforms to regulatory scrutiny.

Why fintech platforms are prime targets

Fintech companies are uniquely exposed to bot-driven fraud because of the very qualities that make them successful.

First, they are entirely digital. With no in-person identity checks, all authentication and onboarding happen online, creating opportunities for fraudsters to exploit weaknesses. Second, fintechs prioritize speed and convenience—fast onboarding, instant transactions, and seamless API integrations—all of which can be targeted by automated attacks.

Third, the assets at risk are especially tempting. Whether it’s crypto wallets, payment apps, or lending platforms, fintechs provide access to liquid, easily moved funds and a ton of personally identifiable information (PII). Finally, fintechs rely heavily on user trust. A single major fraud incident can shake customer confidence and damage a brand for years to come.

How leading fintechs are fighting back

The good news: as fraudsters arm themselves with AI, fintechs can do the same. Advanced bot management and cyberfraud protection solutions now combine real-time AI, multi-layered analysis, and adaptive defenses to stop fraud before it happens. Here’s what leading fintechs are prioritizing:

Real-time, AI-driven detection
Top solutions analyze every login attempt, transaction, and API request in milliseconds—often at the edge, before they reach backend systems. This level of speed is critical for stopping credential stuffing, carding, and automated account creation attempts.

Multi-layered behavioral & intent-based analysis
Effective platforms gather hundreds of signals—device fingerprinting, mouse and keyboard behavior, request headers, and session history—to build a detailed picture of every user interaction. Advanced AI models then evaluate these signals not only to detect sophisticated bots that mimic human behavior and rotate IP addresses, but also to identify malicious intent from human users, such as coordinated fraud attempts, social engineering, or suspicious account manipulation. This layered approach helps stop both automated and human-driven attacks before they cause damage.

360 coverage
Fintechs need protection across web platforms, mobile apps, and APIs. A fragmented solution leaves gaps that attackers can exploit. Advanced platforms provide unified protection across all endpoints , ensuring no weak spots.

Frictionless protection for genuine users
With bots now able to solve CAPTCHAs as well as, or better than, humans, fintech companies are moving away from blunt-force protections. Today’s top solutions introduce challenges only when necessary, keeping the experience seamless for legitimate users. DataDome makes decisions in less than 2 milliseconds, and only presents every 1 in 10,000 requests with a CAPTCHA (<0.01% false positive rate). 

Continuous learning & threat intelligence
Fraud evolves constantly. The most effective solutions continuously retrain models, update detection rules, and use collective intelligence to scale protection against new threats across their entire customer base. 

Why DataDome stands out

DataDome is a leader in bot and online fraud protection, helping fintech companies navigate today’s threat landscape with confidence.

What sets DataDome apart is its real-time, AI-powered detection engine, capable of analyzing each request in under 2 milliseconds. With 5 trillion signals analyzed daily, DataDome identifies and neutralizes sophisticated threats—including ATO, fake account creation, carding attacks, scraping, and Layer 7 DDoS—across all digital touchpoints.

Our approach combines client-side and server-side signals, behavioral analysis, and risk-based decisioning to deliver highly accurate detection with minimal impact on user experience. Fintech companies using DataDome have reported complete elimination of credit card fraud and a measurable reduction in fraud-related incidents, all without increasing user friction or slowing down transactions.

Beyond raw performance, DataDome’s flexible integrations—with coverage across web, mobile apps, and APIs—and its commitment to privacy and regulatory compliance make it a natural fit for fintechs. 

Final thoughts

AI-powered bots have transformed payment fraud from a manual scheme into an industrialized, global operation. For fintech companies, this has raised the stakes dramatically — but it has also opened the door to out-innovate attackers.

By investing in real-time, AI-driven bot and fraud protection, fintechs can not only prevent losses but also strengthen the user trust that fuels their growth. In the battle of AI versus AI, it’s the companies that act fast and stay adaptive that will come out ahead.

DataDome’s Bot Protect and Account Protect solutions are built to help fintechs outsmart today’s most sophisticated threats. From stopping account takeover and carding attacks to blocking fake account creation and API abuse, DataDome delivers scalable, real-time protection without slowing down your business.

Cyberfraud defense that learns from every transaction.

Ready to safeguard your platform and stay ahead of attackers? Request a demo today and see how leading fintechs are turning fraud defense into a competitive advantage.