Fraud Experts Demand 'Explainable AI'

The push for explainable AI coincides with a surge in AI-driven financial crime, with fraudsters leveraging generative AI to create convincing deepfakes and automate attacks at an unprecedented scale. This has turned AI into both the biggest threat and the most essential tool for financial institutions in 2026. A recent survey highlighted that only 35.8% of financial institutions have established internal policies for ethical AI use, with 28.4% citing explainability and transparency as their top regulatory concern. This regulatory focus is global, with frameworks increasingly referencing principles of transparency, explainability, and accountability. However, implementation varies, from the UK's outcomes-focused supervision to the EU's prescriptive rulebooks. In the U.S., supervisors are elevating expectations for AI governance, demanding that AI used in high-risk areas like underwriting and fraud surveillance be subject to rigorous oversight and bias management. The adoption of real-time payment networks like FedNow and RTP intensifies the need for faster, AI-driven fraud detection, as these systems create new vulnerabilities for authorized push payment (APP) fraud. While The Clearing House's RTP network still leads in account reach, FedNow has seen a 1,200% year-over-year increase in transaction volume as of Q1 2025, with both networks developing network-level fraud mitigation tools. Consortium data, a shared pool of anonymized fraud intelligence from thousands of financial institutions, offers a more comprehensive view of industry-wide fraud trends. This collaborative approach helps members identify repeat offenders, spot emerging fraud patterns, and calibrate their anti-fraud systems more effectively than relying on internal data alone. Companies like Sonar are closing visibility gaps between banks and fintechs by sharing real-time insights under frameworks like Section 314(b) of the USA PATRIOT Act. Digital identity verification is becoming a critical layer of security for instant payments, using biometrics and AI to streamline KYC checks and secure transactions in real-time. This helps combat synthetic identity fraud, a rapidly growing threat fueled by generative AI. As money moves faster across borders, digital IDs are crucial for ensuring compliance and KYC processes can keep pace. For senior product managers, navigating this complex environment requires influencing without authority—a skill built on earning trust and aligning cross-functional teams around a shared vision, rather than relying on formal power. This involves understanding stakeholder constraints, communicating clearly with data, and consistently delivering results to build credibility. It's about seeing a gap and stepping up to lead before a formal title is granted. Venture capital investment in fintech is showing signs of recovery, with global funding up 21% in 2025, though still below the 2021 peak. Investors are increasingly focused on early-stage startups with innovative technologies, particularly those leveraging AI for fraud detection and prevention. However, cybersecurity-focused funding saw a seven-year low in 2025, even as the threat landscape becomes more complex.