New Delhi | Deepfake technology powered by artificial intelligence (AI) is no longer confined to fake social media videos and online misinformation. It has now emerged as a significant threat to the banking, financial services and insurance (BFSI) sector, where fraudsters are allegedly using AI-generated identities and manipulated videos to bypass video Know Your Customer (KYC) and identity verification processes. Industry experts and cybersecurity professionals warn that low-cost, open-source AI models are enabling criminals to execute increasingly sophisticated financial fraud schemes.
According to experts, modern deepfakes have become so realistic that distinguishing them from genuine videos and images is becoming increasingly difficult. As a result, financial institutions that rely on video-based customer onboarding and verification are facing a new generation of cyber threats. Fraudsters are reportedly using fabricated identities, manipulated documents and AI-generated facial imagery to impersonate legitimate customers and gain access to financial services.
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Industry sources say the threat is no longer theoretical. In several instances, criminals have allegedly succeeded in deceiving video KYC and underwriting systems, resulting in substantial financial losses. In one reported case, a non-banking financial company (NBFC) is believed to have suffered losses estimated between ₹15 crore and ₹20 crore after fraudulent applications were processed using manipulated digital identities. Such incidents highlight how deepfakes are evolving into a powerful tool for organized financial crime.
Technology specialists note that many fraudsters are not using expensive frontier AI models. Instead, they rely on smaller open-source models that can be operated on commercially available gaming computers. This significantly reduces the cost of creating convincing deepfakes and lowers the technical barriers for cybercriminals. Specialized tools built on these models are often circulated through online communities and underground digital networks, making them accessible to a wider range of threat actors.
One particularly concerning method is known as deepfake injection. In this technique, a pre-generated image or video is inserted into a device or camera feed to fool identity verification systems. Experts warn that some of these deepfakes are capable of passing liveness checks, which are designed to confirm that a real person is physically present during the verification process. Since many digital onboarding systems rely heavily on facial verification, the ability to bypass liveness detection presents a significant security challenge.
Amid growing concerns, India’s cybercrime authorities have issued advisories warning that criminals are increasingly leveraging AI-driven technologies to circumvent existing cybersecurity safeguards. Experts believe that financial institutions will need to move beyond traditional identity verification models and adopt layered security mechanisms that combine biometric validation, behavioral analytics and advanced fraud detection tools.
Renowned cybercrime expert and former IPS officer Prof. Triveni Singh believes deepfake-enabled financial fraud could become one of the most serious cybercrime challenges of the coming decade. According to him, cybercriminals are no longer limited to phishing links, OTP scams or social engineering calls. They are now combining AI-powered deception with traditional fraud techniques to create highly convincing attacks capable of misleading both customers and financial institutions. He emphasizes that AI-based risk assessment, behavioral profiling and advanced authentication systems must become integral parts of video KYC and digital onboarding frameworks.
To counter the growing threat, several technology firms are developing deepfake detection solutions capable of analyzing images, videos and documents for signs of manipulation. These systems aim to identify synthetic content before fraudulent transactions or account openings can occur. However, experts acknowledge that the contest between AI-powered attacks and AI-driven defenses is becoming increasingly intense.
Concerns have also been amplified by recent banking fraud figures. According to the Reserve Bank of India’s annual report, the banking industry reported fraud worth ₹48,021 crore in FY2026, compared with ₹32,803 crore in FY2025, representing an increase of 46.4 percent. While not all of these cases were directly linked to deepfakes, cybersecurity professionals believe emerging AI technologies are likely to play a growing role in identity-based financial crime.
Experts further caution that the threat extends well beyond the BFSI sector. E-commerce platforms, quick-commerce services, social media networks, dating applications and digital payment ecosystems are all increasingly vulnerable to deepfake-enabled fraud. As AI tools become more accessible, organizations are being urged to strengthen identity verification procedures, while consumers are advised to remain vigilant when sharing personal documents and engaging in online identity-related transactions.
