The Role of Artificial Intelligence and Robotic Process Automation (RPA) in Fraud Detection: Enhancing Financial Security through Automation

Purpose: The growing sophistication of financial fraud in the banking sector has necessitated the adoption of advanced technical solutions such as artificial intelligence (AI) and robotic process automation (RPA) to enhance fraud detection and prevention. This study examines the role, effectiveness, and challenges of AI and RPA in combating financial fraud, addressing gaps left by traditional rule-based systems. Methodology: This study employs a literature review methodology, synthesizing existing research, case studies, and industry reports to evaluate the impact of AI and RPA on fraud detection. Key themes analyzed include real-time analytics, anomaly detection, predictive modeling, operational efficiency, and implementation challenges. Findings: The findings reveal that AI significantly improves fraud detection accuracy, reduces false positives, and adapts to emerging threats, while RPA enhances compliance and operational efficiency by automating repetitive tasks. However, challenges such as algorithmic bias, adversarial AI attacks, data privacy concerns, high implementation costs, and ethical dilemmas around transparency and accountability hinder widespread adoption. Despite these obstacles, financial institutions report substantial reductions in fraud-related losses after integrating AI and RPA. Unique contribution to theory, practice and policy (recommendations): This study contributes to theory by consolidating insights on AI and RPA’s transformative potential in fraud detection. For practice, it recommends investing in explainable AI, robust adversarial defense mechanisms, and cost-effective RPA integration. Policymakers should establish ethical AI governance frameworks, promote regulatory alignment, and incentivize innovation to ensure financial security and transparency. The study underscores that maximizing the benefits of AI and RPA requires continuous technological advancement, ethical oversight, and collaborative regulatory efforts.