New Celent research finds synthetic identity fraud, application stacking, and bust-out fraud are outpacing what any one lender can detect alone
A new industry report from Celent, commissioned by Zest AI, reveals that fraud has moved from an operational cost to a direct contributor to credit losses—one that lenders are finding increasingly difficult to detect and combat on their own. A survey of 115 U.S. financial institutions found that 93% of lenders say fraud contributes to their credit losses, and 82% report fraud losses increased in 2026 compared to the year prior. The findings point to an industry that is not just losing ground to fraud, but doing so in ways that demand a fundamentally different response.
Fraud exploits the gaps between lenders
Sixty-one percent of lenders identified synthetic identity fraud as the fastest-growing fraud type in 2026, alongside bust-out fraud (56%), and application stacking (55%). What these fraud types have in common is that they are engineered to go undetected within the boundaries of a single institution. A fraudster applying for loans at multiple lenders at once is invisible to each of them individually. A carefully constructed synthetic identity clears standard checks.
“Fraud has evolved from a contained risk into a systemic threat that is cutting directly into lender profitability,” said Craig Focardi, Principal Analyst at Celent. “What makes this moment different is the nature of the fraud types that are driving losses. Synthetic identities, bust-out fraud, and application stacking are not opportunistic acts. They are organized, cross-institutional attacks, and no single lender has the full picture on their own. The industry needs a fundamentally different approach to detection and intelligence sharing if it wants to get ahead of this problem.”
Fighting a networked problem requires a networked response
Catching today’s fraud requires seeing beyond your own portfolio, and no lender can do that without the right data, models, and shared intelligence. Seventy-five percent of lenders are increasing fraud technology spending this year, and 70% are adding staff to fight it, yet fewer than one-third currently use AI/ML fraud models, alternative data signals, or consortium-based intelligence. Those are the tools built to catch what traditional controls miss, and the report makes it clear that closing this gap is where the industry’s focus needs to go.
- Broad support for data sharing, but low participation: 73% of lenders agree that fraud data-sharing consortiums benefit the industry as a whole, yet only 34% currently participate in one—a gap that reveals belief in the model far outpaces adoption.
- A large share of the market is waiting for the right option: Another 46% say they are interested or would participate if the right consortium existed, including 25% who would join a cross-lender fraud signal consortium today, and 21% who are still evaluating the benefits of fraud data sharing.
- The tools lenders have are not keeping up: 64% of lenders say their fraud IT does not keep up with new fraud methods, signaling incremental investment in existing tools is not enough.
“These findings reflect a broader industry reality: the cost of fighting fraud is rising, and many institutions are struggling to keep pace with increasingly sophisticated attacks,” said Mike de Vere, CEO of Zest AI. “Fraudsters are operating across institutions, and lenders are largely still fighting back within the walls of their own portfolio. The answer for lenders is shared intelligence that makes cross-institutional fraud visible before it becomes a loss, and that is exactly where we are focused.”
Zest AI’s Fraud Detection helps lenders identify first-party and behavioral fraud at scale. It captures more than 50% of malicious intent, surfaces over 40% more first-party behavioral fraud with minimal manual review, and keeps more than 80% of consumer loan applications auto-decisioned, so lenders do not have to choose between speed and safety.
