If people do not trust the system, they will not use it

I just got the LSEG (London Stock Exchange Group) Risk Intelligence report which makes clear that we have crossed a line.

Fraud is no longer something that happens at the edges of the financial system. It has become the system’s shadow twin, growing in lockstep with digital banking, instant payments and AI. The 2026 LSEG global consumer fraud survey makes that painfully clear. This isn’t niche. It’s mainstream. Across the world, most people now believe fraud is spiralling, and a large proportion have already been targeted in recent years, with a meaningful number actually losing money.

That alone should worry banks.

But it gets worse.

This isn’t just more fraud. It’s better fraud.

We’ve entered the era of industrialised deception. AI has effectively handed fraudsters a production line. Deepfakes, synthetic identities and perfectly crafted phishing messages are no longer experimental. They are operational, scalable and cheap. The report shows that a growing share of consumers have already encountered AI-driven scams. Think about that. We are only at the foothills of generative AI, and already a significant portion of the population has seen it used against them. Give it a few years and this becomes pervasive.

This is what happens when you combine vast amounts of data, intelligent machines and clear financial incentives. You don’t get incremental fraud. You get exponential fraud.

And yet, the most interesting insight in the report isn’t the money.

It’s the emotion.

Fraud doesn’t just empty your account. It empties your confidence. Victims talk about anger, anxiety, embarrassment and even shame, as if being scammed is somehow their fault rather than a failure of the system around them. That’s the real damage. Not the financial loss, but the erosion of trust.

And when trust goes, everything starts to crack.

People change how they behave. They hesitate before clicking, question every transaction and become wary of digital channels. Some begin to withdraw from the system altogether, not just financially but psychologically. That matters, because for the past two decades we have been pushing in exactly the opposite direction, telling everyone to go digital, go mobile, go self-service.

Now we are seeing the other side of that strategy. If everything is digital, then everything is attackable.

Here’s the uncomfortable truth the report hints at but doesn’t quite say outright. We built a frictionless financial system and forgot that friction is often what stops crime. Every time we made onboarding faster, payments instant and authentication invisible, we also made fraud easier. The same technologies that create value also create vulnerability. That is the paradox at the heart of modern finance.

There is also a widening gap between what consumers think they understand and what they actually know. People are trying to protect themselves, but most don’t really grasp what protections they have when things go wrong. That creates an uneven playing field where individuals are navigating a complex system with partial knowledge, while fraudsters exploit it with precision.

It starts to look less like isolated crime and more like asymmetric warfare and, right now, the advantage is not with the consumer.

This leaves banks in a difficult position. They are being pushed to digitise faster, automate more and reduce costs, while at the same time becoming the frontline defence in a global fraud epidemic. You cannot do both without rethinking the operating model. This is not just about deploying better detection tools or layering on more AI. It is about redesigning how trust actually works.

We are moving into a world of digital identities that may or may not be real, AI agents acting on behalf of individuals and autonomous financial decisions happening in the background. In that world, the core question shifts. It is no longer simply whether a transaction is authorised. It is whether the identity behind it is genuine.

If you cannot answer that with certainty, the entire system starts to wobble.

That is why this is not really about fraud losses but about the slow, steady erosion of confidence in the digital economy. Fraud has evolved from a criminal issue into a customer experience issue and now into something much bigger, namely a systemic trust problem and systemic trust problems do not stay contained. They spread. They undermine adoption, slow activity and weaken confidence in institutions. Push that far enough and it starts to look like a risk to the stability of the system itself.

So, the real takeaway is simple. We are no longer fighting yesterday’s fraud problem. Instead, we are entering a world where machines target humans with machine precision, identities are fluid and trust becomes the only truly scarce resource.

You can build the smartest, fastest and most intelligent financial system ever created but,a if people do not trust it, they will not use it.