The Benefits of the M&A Frenzy in Fraud Solutions

As cybercriminals exploit artificial intelligence-generated deepfake scams and synthetic identity fraud, financial institutions are investing heavily in fraud detection, anti-money laundering solutions and identity verification to stay ahead.

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This rising demand is fuelling rapid innovation and a surge in merger-and-acquisition activity, as firms expand capabilities and test emerging AI technologies to address evolving security and regulatory challenges.

These changes are driving three key areas of industry transformation – fraud and AML, scams, and identity verification – all of which were the targets of M&A activity in 2024. Experts say emerging technologies and consolidation are reshaping fraud prevention in 2025.

With businesses looking to reduce the number of vendors they work with to lower integration costs, David Mattei, strategic advisor at Datos Insights, expects “a higher momentum of M&A activities in 2025 as vendors race to grow.”

“Single-solution vendors have a harder time competing in today’s world,” and small to medium-sized single solution vendors “are likely to be acquired,” Mattei said. LexisNexis’ acquisition of IDVerse in December 2024 is an example of this this trend.

Fraud Prevention Vendors in 2025

The About-Fraud 2025 Solution Providers infographic depicts new vendors across multiple categories. Many of these players have emerged over the past three to four years, bringing fresh innovation to fraud detection, authentication and risk management.

Fraud and AML Solutions

In the fraud and AML space, several of these relative newcomers have gained prominence including Inscribe, Resistant.AI, Sardine and Quantexa.

Founded in 2016, Quantexa has gained traction in the past two years, surpassing $100 million in annual recurring revenue in 2024 with its contextual decision intelligence for financial fraud detection. Meanwhile, Inscribe is making strides in AI-powered document fraud detection, enhancing identity verification. Sardine, founded in 2020, specializes in fraud prevention for fintechs, integrating behavioral biometrics and transaction monitoring.

Experts consider Fraud and AML a mature market, marked by major M&A activity, including Visa’s acquisition of Featurespace. At the time of the acquisition announcement, Visa praised Featurespace’s adaptive behavioral analytics and recurrent neural networks as essential for detecting both low- and high-value fraud, and tackling the increasing complexity of financial crimes.

The urgency behind these investments is clear: In 2023, an estimated $3.1 trillion in illicit funds flowed through the global financial system, with money laundering fueling a range of criminal activities. This included approximately $11.5 billion in terrorist financing. Fraud scams and bank fraud schemes also resulted in $485.6 billion in projected global losses.

As financial crime escalates, the demand for advanced fraud and AML technologies continues to grow, driving both innovation and consolidation in the sector. The industry expects more M&A activities this year, and it already started with Worldpay announcing its acquisition of Ravelin, an AI-driven fraud detection company that helps merchants combat online fraud.

Trace Fooshee, strategic advisor at Datos Insights, pointed out that fraud and AML experienced some of the highest M&A activity, driven by market forces increasing demand for these platforms. He attributes this surge to financial institutions consolidating IT infrastructure across business units to streamline overlapping requirements and improve efficiency.

Many see this as fraud and AML “convergence,” but that misrepresents the intent, he said. “Financial institutions consolidate not to merge units but to cut costs and eliminate waste. A unified alert, case investigation and SAR filing platform reduces duplication and streamlines operations,” Fooshee said. With no signs of slowing, M&A will likely continue to grow.

Scam Prevention Solutions

Scam prevention is an emerging industry with high growth as online financial scams grown in recent years. The Global Anti-Scam Alliance reported that scammers stole $1.03 trillion in 2024. The group says deepfake-related crime increased by more than 1,500% between 2022 and 2023.

According to Datos Insights, scam prevention has become one of the top priorities for businesses. It’s a new frontier in the fraud controls market, with all major competing firms founded in 2023 or later.

Fraud executives agree that the most pragmatic approach today is proactive communication and awareness campaigns, and the data supports their effectiveness. However, the most anticipated and potentially effective solution is consortia-based fraud detection, combining risk signals from both sending and receiving financial institutions, Fooshee told Information Security Media Group.

The challenge lies in overcoming resistance to information sharing – from fraud teams, compliance, legal and regulators – because of concerns over data integrity, integration complexities and privacy restrictions. Interestingly, markets most affected by scams and with simpler regulatory landscapes are finding ways to navigate these barriers more effectively.

Some markets including Australia, Singapore and the United Kingdom are relatively uncomplicated but scams have had a particularly negative and visible impact on consumers. Markets that are exceptionally complex, large and inconsistent, such as the United States, are going to struggle to respond to scams. “Though the market for these controls is very strong, but it is growing inconsistently as each market grapples with how to overcome impediments that constrain solution providers and FIs from sharing information,” Fooshee said.

Identity and Verification: Strengthening Digital Trust

As fraudsters increasingly exploit synthetic identities, companies such as Persona, Identiq and Pipl are gaining traction. While this sector is relatively mature, it lags behind fraud and AML platforms in terms of consolidation.

Notably, acquisitions in this space have been largely driven by fraud and AML vendors seeking to enhance transaction fraud detection with account-level data signals and behavioral analytics. At the same time, authentication and identity platforms are expanding through strategic acquisitions, such as LexisNexis’ acquisitions of BehavioSec and IDVerse.

For financial institutions, identity verification remains a top priority, with solutions offering a strong, multi-dimensional business case. “These technologies have proven their value not only in mitigating fraud losses but also in reducing friction during customer onboarding and engagement,” Fooshee said.

A survey of fraud executives by Datos Insights reflects this trend, ranking identity authentication and verification solutions as the top two investment priorities for fraud practitioners.

The Way Forward

Experts say orchestration is rapidly becoming a cornerstone of fraud prevention, helping financial institutions integrate once with a provider and gain access to a suite of solutions. This streamlined approach reduces the total cost of ownership and simplifies IT infrastructure, making it an attractive proposition for banks and fintech firms. Companies such as Alloy and Spec are driving innovation in this space, while established vendors including SAS, FICO and Feedzai continue to expand their orchestration offerings.

“This shift toward orchestration is about efficiency and scalability,” Mattei said. “Instead of managing multiple integrations, FIs can leverage a single point of entry to access a variety of tools, ultimately strengthening their fraud detection and risk mitigation capabilities.”