Adopting AI may cut banking fraud

As scams are increasing day by day, the adoption of artificial intelligence (AI) could significantly reduce fraud and cyber scams in Pakistan's banking sector by enabling financial institutions to detect suspicious transactions in real time and prevent financial losses for customers and banks, industry experts say.

According to the Banking Mohtasib Pakistan, complaints related to banking fraud have continued to rise despite various preventive measures introduced by regulators and financial institutions. The number of fraud-related complaints increased to 4,615 in 2025 from 4,171 in 2024 and 3,489 in 2023, highlighting an alarming trend in cybercrimes.

Pakistan's financial inclusion gains are increasingly intertwined with cybersecurity challenges. The State Bank of Pakistan's Pakistan Financial Inclusion Index (P-FII) for 2024 rose to 58.1 from 54.8 a year earlier, driven by stronger access (72.3) and usage (62.5) of digital and conventional financial services. Account ownership now stands at 67% of the adult population, thanks to expanded digital banking, mobile wallets and payment channels.

Yet the quality sub-index remains the weakest at 43.9, highlighting gaps in service standards, literacy and equitable reach. As more citizens and businesses shift to digital finance, the same infrastructure that enables inclusion also expands the attack surface for cyber threats, including fraud, data breaches and disruptions to payment systems.

The SBP's National Financial Inclusion Strategy 2024-28 prioritises quality financial services. Securing these services through robust cybersecurity frameworks, stronger consumer protection and coordinated efforts with bodies such as PKCERT (Pakistan Computer Emergency Response Team) is essential. Without adequate safeguards, rapid digitalisation that has lifted access and usage risks eroding public trust and undermining the very inclusion gains recorded so far. Balancing expansion with resilience will determine whether financial inclusion delivers lasting economic benefits.

The rapid digitisation of Pakistan's financial system has made banking services faster, more convenient and widely accessible. However, it has also exposed customers and financial institutions to an increasing number of cyber threats, including phishing attacks, identity theft, payment fraud and account takeovers.

Artificial intelligence experts believe banks should accelerate the deployment of AI-powered fraud detection systems to combat the increasing number of digital scams while strengthening coordination with law enforcement agencies to identify and prosecute cybercriminals.

Muhammad Waleed, an AI quality engineering expert, said AI applications not only improve operational efficiency through automation but also play a critical role in detecting and preventing financial fraud. He said commercial banks should invest in advanced technologies such as AI and machine learning to strengthen their fraud detection capabilities.

He added that regulators, banks, digital financial service providers and other stakeholders should also enhance their technical capacity to effectively deploy AI-based monitoring systems. "Artificial intelligence has transformed fraud detection by leveraging machine learning, deep learning and big data analytics to improve both speed and accuracy," Waleed said.

AI-powered systems can analyse millions of transactions in real time, identify unusual behavioural patterns and detect potentially fraudulent activities with far greater accuracy than conventional rule-based monitoring systems, he added. Pakistan's banking sector has witnessed a surge in digital fraud in recent years, with phishing campaigns, fake social media advertisements, UAN spoofing and identity theft among the most common tactics used by cybercriminals to steal customers' credentials and gain unauthorised access to bank accounts.

According to cybersecurity company CTM360, phishing attacks in Pakistan increased tenfold between 2019 and 2023, while other cyber threats, including malware infections, stolen credentials and payment card data leaks, increased eightfold during the same period. Abdus Samad Khan, Chief Executive Officer of iPath, said Pakistani banks should modernise their fraud management frameworks by integrating AI-driven technologies across the financial ecosystem, including commercial banks, branchless banking providers and fintech companies.

He said cybercriminals continuously evolve their techniques to bypass conventional fraud detection systems, making it essential for financial institutions to adopt intelligent systems capable of learning and responding to new threats in real time. "As digital financial services continue to expand, fraud management systems must also evolve through continuous testing, regular system upgrades and feedback from cybersecurity experts and customers," he said.

Experts stressed that investment in technology alone would not be sufficient. They called on banks to strengthen financial literacy and customer awareness programmes, educate users about emerging cyber threats and improve collaboration with law enforcement agencies. They said a combination of advanced AI technologies, stronger regulatory oversight and greater public awareness would be essential to safeguarding Pakistan's rapidly growing digital banking ecosystem.