In today’s hyperconnected financial landscape, identity is the new perimeter. And attackers know it. Artificial intelligence is accelerating identity-based cyberattacks, allowing fraudsters to exploit stolen credentials, automate phishing, and bypass traditional defenses faster than ever. For banks and credit unions, this shift marks a critical moment. To protect customer trust and financial assets, security teams must evolve just as quickly – or risk becoming prime targets.
Customer login credentials, privileged access tokens, biometric records, and personally identifiable information (PII) are now among the most valuable assets in a cybercriminal’s arsenal. These identity-related assets are increasingly accessible via data breaches and dark web marketplaces. AI makes them even more dangerous by enabling real-time analysis, correlation, and exploitation.
In the financial sector, this means attackers can hijack active single sign-on (SSO) tokens, bypassing standard login protocols entirely. AI-powered brute force and credential spraying tools can crack weak or reused passwords in seconds. Even more troubling, AI-driven phishing and social engineering tactics can convincingly impersonate bank representatives, tricking customers into handing over sensitive information or access to their accounts.
The 23andMe breach demonstrated just how far attackers will go to exploit identity data, using credential reuse and social engineering to access genetic and financial data. Financial institutions must prepare for similar tactics being used to target retail banking customers.
AI has transformed classic cyberattack methods into high-speed, high-scale threats. Credential stuffing, for instance, is now fully automated. Bots rapidly test millions of stolen login combinations across online banking platforms, exploiting weak password hygiene and the common practice of reusing credentials across services.
Social engineering is also becoming more sophisticated. Fraudsters use AI to generate realistic phishing emails, chats, and even voice calls. In one common scenario, attackers impersonate customer service agents using AI-generated audio to convince customers to “verify” their identity—ultimately handing over sensitive information or granting access to accounts.
These tactics are contributing to a surge in account takeovers. Regional banks and credit unions are particularly vulnerable, experiencing login-related cybersecurity incidents at significantly higher rates – 12% and 52% more, respectively – than larger financial institutions. Without the same level of fraud detection infrastructure, smaller organisations become soft targets.
AI may be a powerful threat, but it also offers equally powerful defense capabilities. Banks must move beyond legacy, rule-based systems and adopt intelligent, adaptive security strategies. Three areas are especially critical:
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Behaviour-based threat detection: AI can analyse customer behaviour to detect unusual activity – such as an account typically accessed from a single device in one location suddenly logging in from multiple geographies. These patterns, when flagged in real time, can stop fraudulent activity before it escalates. In addition, real-time identity verification using biometrics and identity proofing technologies adds another layer of defense, ensuring that even if credentials are compromised, only the legitimate user can access the account.
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Automated identity hygiene: Outdated or unused accounts, along with excessive access privileges, increase risk. AI can continuously audit user and employee access, identify dormant accounts, and remove unnecessary permissions. This proactive cleanup helps reduce the attack surface and limits the damage if a breach occurs.
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Phishing-resistant customer authentication: Phishing remains the number one attack vector in retail banking. To combat it, institutions must shift toward phishing-resistant authentication methods such as passkeys or passwordless solutions like Okta FastPass. These technologies deliver a smoother, more secure login experience while eliminating one of the most common points of failure.
AI isn’t just replicating human behaviour, it’s surpassing it. With massive computing power and the ability to process millions of data points in real time, AI can uncover vulnerabilities, execute attacks, and evade detection faster than any human team can respond.
That’s why financial institutions must not only anticipate AI-driven attacks but also fight back with equally advanced, AI-powered defenses.
Traditional, human-scale security strategies are no longer enough. The future of identity security in banking lies in automation, real-time visibility, and adaptive authentication that protects customers without sacrificing experience.
Because the next generation of identity threats is already here – and it’s moving at machine speed.
Arun Shrestha is CEO, BeyondID
“AI is supercharging cybercrime — here’s how financial institutions can stay ahead” was originally created and published by Retail Banker International, a GlobalData owned brand.
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