The Synthetic Identity Fraud Threat Credit Unions Can’t Afford to Ignore

For credit unions, trust with members is everything. People come first, that’s the heart of the movement. But that trust is under pressure like never before with the sharp rise in synthetic identity fraud.

Here’s common example that could be any of your members—they think their identity is secure, but a fraudster across the world stole their social security number and email in a data breach. With that, the fraudster can build a synthetic identity that’s convincing enough to slip into a legacy verification system undetected.

This isn’t a one-off scenario. It happens every single day, and it’s only getting worse. AI-enabled fraud makes it easy for bad actors to generate realistic photos, voices, and videos that fool even advanced biometric systems. Organized fraud rings operate like mini enterprises, running large-scale operations that target financial institutions through constant testing, iteration, and refinement.

The harsh reality is that most credit unions can’t keep up. Fraud continues to rise while prevention expenses climb, and credit unions are left with less time to focus on delivering an exceptional member experience.

The problem with most identity verification strategies

It’s important to understand why current verification approaches are failing. And it’s not just credit unions—financial institutions across the board are struggling. Industry-wide, fintechs, banks, and credit unions spend over $21 billion annually on fraud prevention, yet nearly 60% still report rising attacks. Costs keep climbing, but fraud keeps getting worse. It’s not sustainable.

Members expect better too. In fact, 27% of credit union members say that security and trust features are where they most want their credit union to innovate. Falling behind on fraud prevention doesn’t just expose institutions to risk—it undermines member trust.

The core problem is that most identity verification systems were designed for yesterday’s fraud environment, not today’s sophisticated, AI-powered attacks that move at greater speed and scale.

Three weaknesses stand out:

1. Static defenses that can’t stop synthetic or AI-powered fraud

Most verification systems rely on static, outdated data and rule-based checks, which leave gaps that fraudsters can exploit. This is a huge risk, especially with the rise of synthetic fraud, which is one of the fastest-growing threats in financial services. Fraudsters can easily generate synthetic identities that pass checks, pulling from outdated credit files or government IDs.

2. The “Swiss cheese” defense that lets in more fraud

Credit unions shouldn’t have to choose between security and experience. Some credit unions may respond to rising identity fraud by adding more point solutions: one for document checks, another for phone validation, another for email risk. On paper, more tools should mean stronger protection. In practice, it fails.

Disconnected systems lead to data silos and inconsistent risk scoring, making it nearly impossible to form a complete picture of user behavior. The result can be described as a “Swiss cheese” defense, full of holes that fraudsters exploit. Meanwhile, added layers can create friction for actual members, which is a big risk when we know that prospective members will likely abandon applications that take too long.

3. The cost spiral credit unions can’t afford

A piecemeal approach means overspending on verification, often paying dozens of vendors for overlapping services. Each tool typically comes with its own per-call charge, stacking incremental fees at every step of the journey, hurting the bottom line and making it challenging to juggle the cost economics of balancing security and member experience.

Rethinking identity verification before it’s too late

Credit unions need a verification strategy that can handle the fraud that’s happening today and what will happen next. Keeping up in the arms race against AI-driven fraud should have an approach that delivers on the following:

• Instantly block bad applications while fast-tracking good ones
• Reduce identity fraud while also cutting verification costs
• Eliminate expensive, fragmented point solutions
• Move beyond time-consuming manual fraud reviews

With the right technology, your credit union can focus on what it does best—delivering an exceptional member experience—while knowing that the back end is protecting members and keeping bad actors out.

The smarter way for credit unions to fight identity fraud

The solution? Verify, Fideo’s identity verification platform. Powered by the iFIN Network, which links billions of real-time signals across public, private, and deep web sources, its AI is built to outpace the AI of fraudsters.

Verify is a new foundation for identity verification. Instead of piling on more tools, it delivers one unified risk score for the most comprehensive protection. With a single API call, credit unions get a unified risk score based on multiple categories of industry-leading checks:

• Synthetic Identity: Detect fabricated profiles through mismatched personal details and abnormal device or IP linkages
• General Identity/Sanctions: Check applicant data against a dynamic identity database, including global sanctions, PEP lists, and expected identity fragment coherence
• Email Risks: Verify email legitimacy by checking deliverability, domain risk, creation date, disposability, and real-time usage coupled with usage history
• Phone Risks: Identify risk surrounding a phone number, including porting, DNO, observed usage, and more
• IP Address Risks: Identify risk associated with an IP address, including location, proxy types, blocklists and others
• Digital Presence Risks: Compare identity against an associated digital footprint encompassing social networks, mobile devices, and general internet behavior
• Location Confirmation/Risks: Compare location data to detect anomalies and inconsistencies in residency and travel patterns
• Breach/ID Theft Risks: Analyze extensive known breached data sets to assess identity exposure, recency, and potential use in attacks
• Government Identification: Verify SSNs in accordance with compliance procedures

The ROI payoff is huge. The market value of running all eight categories of checks individually adds up to $1.14 per user session. Verify bundles them for less than half that cost, with unlimited checks included. No more overpaying for a handful of signals, or worse, getting nickeled and dimed by separate vendors at every step.

It’s time to knock identity fraud out at the gate. And with KYC costs averaging $4.36, the cost savings will go even further.

Want to see how Verify can help your credit union get ahead?

Experience Verify firsthand here—no integration, no hassle. See why it’s a game changer for your members, your fraud team, and your bottom line.

Ready to take the next step with Verify?

You can access our API directly through your favorite platform. Reach out to the Fideo team to learn more.