AI Risk Rises As "Synthetic Identities" Spread, Experian Report Warns

Estimated reading time: 6 minutes

On a bright screen at midnight, a new bank account waits for a name. Fraudsters arrive with “synthetic identities,” polished and ready for approval. The phrase sounds like a dystopian movie prop. It isn’t make-believe. Experian’s new U.S. Identity & Fraud Report casts that moment as a turning point, an operating reality for banks, retailers, and households. The foreword calls trust “the currency of commerce,” and it shows that trust is under strain. AI Risk now shadows sign-ups, payments, and password resets by enabling more sophisticated automated attacks, fake accounts, and faster breaches. Personal cybersecurity now operates like daily hygiene, with alerts, updates, and verification at the center.

Experian’s 2025 U.S. Identity & Fraud Report, now in its 10th year, is based on surveys of more than 2,000 consumers and 200 businesses from March and April 2025. The report stresses that trust, which it calls the currency of commerce, is under pressure.

Digital Risk In A Volatile Market Landscape

Experian reports that 2025 continued a long-term trend: as more people use digital services, fraud increases. The report cites FTC data showing consumers lost over $12.5 billion to fraud in 2024, a 25% increase from the previous year. FBI data shows $16.6 billion in losses from scams and cybercrime in 2024, up 33% from 2023. Businesses are also affected, with nearly 60% reporting higher fraud losses than the year before.

Experian also notes a change in fraud tactics. Deepfakes and real-time social engineering are now common tools for fraudsters. This change increases risks for cyber insurers and leads to higher costs for consumers, who may need account recovery and credit repair services.

The report describes identity as an ongoing security decision. It states, “Identity isn’t a checkpoint,” and calls it a “dynamic trust contract” that is renewed with every interaction.

Fraud Taking An Emotional Toll

Experian clearly states that consumers are most concerned about identity theft. The report says, “Identity theft still reigns supreme,” with 68% listing it as their top online security worry and 61% concerned about stolen credit card information. These concerns lead people to focus on device security and monitoring their accounts.

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Smarter Homes, Scarier Threats

Experian also points to the house itself as a new fraud surface. “Smarter homes, scarier threats,” the company warns in its fraud forecast. Smart devices now sit on the same network as phones and laptops. Virtual assistants, smart locks, cameras, and appliances create fresh entry points. Attackers can grab personal data. They can watch household routines. They can even reach physical access controls. Experian predicts more ransomware tied to home devices. It also predicts more account hijacking tied to household systems. Convenience becomes a risk multiplier for consumers.

New Accounts Bring Higher Expectations

The number of new accounts opened in 2025 did not change much. Only 40% of people surveyed opened a new account in the previous six months. Many consumers give up during the account setup process. Four out of ten thought about quitting, and of those, 52% actually left and chose a competitor.

Is Your Smart Home Secure?

Smart home interior showing AI Risk and personal cybersecurity threats from hacked connected devices.

Experian says this is due to “cognitive overload,” as consumers deal with frequent logins and prompts. The report also points out that older verification methods, like passwords, PINs, and security questions, are common but less secure. Consumers prefer biometrics for both security and convenience, but businesses do not use biometrics enough when creating new accounts.

Businesses Stay In Growth Mode

Many companies still focus on growth before fraud prevention. Experian reports that 59% of firms put revenue ahead of detecting fraud. However, concern about fraud is high, with 90% reporting a high or medium level of worry. Seventy percent say they are increasing their fraud-prevention budgets.

The report lists the top fraud concerns: identity theft at 39%, peer-to-peer payment scams at 37%, and first-party fraud at 35%. Experian says these problems are made worse by companies relying on outdated tools, noting that firms often “default to the tools of the past.”

The AI Risk Paradox

Experian describes a competition between fraudsters and defenders. The report says, “AI has emerged as both a savior and a saboteur in the fraud ecosystem.” It connects GenAI to new types of fraud, such as deepfakes and impersonation scams, where AI creates fake identities and imitates real people to trick businesses and consumers. At the same time, companies use AI to detect unusual activity and behavior more quickly.

The report also highlights agentic AI, which means systems that can make decisions and act on their own. Experian warns that criminals could use this technology to run complex fraud campaigns that adapt and continue without human control, making them harder to find and stop.

Business leaders think the threat from AI-driven fraud will increase soon. Seventy-two percent expect AI-generated fraud and deepfakes to be the main challenges by 2026, but only 37% currently use GenAI to fight fraud. Consumers are also cautious about AI tools. Fewer than one in four use AI-driven tools like chatbots, and only 18% “completely trust” them. This gap affects both AI risk and personal cybersecurity.

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Trust Is Shifting And Fragmenting

Experian notes that trust has improved since last year but is still low. Peer-to-peer payment apps and credit bureaus both score 28% for trust. Only 32% of consumers think companies clearly explain how they use data, but more than 80% expect businesses to address security concerns.

Experian also points out a gap in credibility. While 85% of businesses believe their security measures meet consumer expectations, only 13% of consumers feel completely secure when using a new brand. This difference increases risk during onboarding and customer support, but it also highlights where cyber insurance can help reduce losses.

Trust As A Strategic Asset

Experian ends the report by focusing on relationships. It says, “The story of identity and fraud in 2025 is not just about risk — it’s about relationships.” The report calls trust “the defining metric of success” and encourages companies to see fraud prevention as a strategic asset. It also recommends creating seamless user experiences that build trust.

Experian connects this idea to real results. The company writes, “The best security is invisible when it works.” It reports that its solutions helped prevent $19 billion in fraud losses worldwide last year. In the 2026 fraud forecast press release, Kathleen Peters said businesses need “actionable insights” to keep up. She also called for layered, AI-powered defenses against new scams.

Martin Hinton

Martin Hinton is the Executive Editor and Publisher of Cyber Insurance News and Information. With over three decades of journalism experience across six continents, his work encompasses investigative reporting, documentaries, and coverage of cultural, political, and business news. To learn more about his career, click on his name to visit his LinkedIn page.