Mounting fraud losses, rising costs, and outdated systems highlight the need for more integrated, efficient compliance solutions

European fintechs, banks, insurers, and other financial institutions face growing operational strain as compliance demands and regulation intensify, according to our new research. Compliance fatigue is now an industry-wide concern.

According to Sumsub’s new report, The State of European Financial Services: 2025 Report: 

• 51% of fintech professionals cite “keeping up with changing regulations” as their biggest challenge
• 44% report high operational costs as a major burden
• 29% struggle with transaction monitoring effectiveness
• 25% highlight frequent false positives as a drain on resources

The cost of failure

The research, based on responses from 225 fintech and financial services professionals across Europe, reveals the financial toll of these challenges.

• More than half (55%) report fraud losses between €100,000 and €1 million annually, with 25% losing between €500,000 and €1 million.
• Nearly one in five (18%) lose over €1 million each year.

Disjointed processes preventing proactive strategies

Despite escalating fraud risks, compliance operations remain fragmented. Emerging fraud types like AI-generated deepfakes and synthetic identity document fraud are exposing the limitations of manual checks and siloed tools. Outdated or non-evolving compliance processes can now be easily bypassed, regardless of their quality. 

Without real-time detection, cross-channel monitoring, and consolidated data, teams are left reacting to threats rather than preventing them, increasing exposure and operational costs.

• Leading industry fraud types: Payment fraud (52%), money laundering (48%), and fake documents (43%)
• AI-generated deepfakes increased by 900% in Europe in Q1 2025
• Synthetic identity document fraud has surged 378% in Q1 2025

Fraud advances sidestepping dated setups

As these threats become more complex, financial services providers are still relying on outdated compliance setups. These gaps not only drain resources but also expose firms to avoidable risks, underlining the need for smarter, more scalable compliance infrastructure.

• Over 53% of firms rely on fully or partly manual processes for reporting suspicious activity and transactions
• Only 17% use a fully outsourced transaction monitoring solution.
• Worryingly, over 20% admit they’re unable to detect newer, more innovative fraud methods

Financial services anticipate more regulatory strain

The study also reveals a growing concern about stricter regulations, indicating that the industry is bracing for a tougher regulatory environment – where falling short will lead to stringent financial penalties, and not just internal disruption.

• Nearly half of respondents (47%) anticipate higher penalties for non-compliance in the next 12 months
• 38% expect stricter KYC/KYB requirements
• 50% foresee increased regulation around transaction monitoring

“Financial institutions across Europe are at an inflection point,” said Ilya Brovin, Chief Growth Officer at Sumsub. “They face a compliance environment that’s not only growing more complex, but also more costly to navigate, especially with outdated, manual systems still in place. Meanwhile, the premium on speedy solutions is rising. 76% of fraud occurs after onboarding, which means that compliance can no longer stop at identity verification. Solving this goes beyond risk management: it’s about restoring efficiency, improving user experience, and safeguarding sustainable growth.”

The full report is available to download here: https://sumsub.com/blog/guides-reports/the-state-of-european-financial-services-2025-report/.