Friction has been described as a necessary evil. It wears out tires and sneaker soles, yet, it also makes brakes work and helps us light fires to cook and stay warm. Friction is not just a term used in physics. It has come to be applied to anything that slows down a process. Excessive bureaucracy, for example, is bad friction. Friction has also become a tool in fighting fraud. This involves setting up roadblocks like extra verifications that make it harder for hackers. However, financial institutions seeking to use friction in this way must walk a fine line between fighting fraud and upsetting customers with excessive processes that slow down legitimate transactions. Say hello to smart friction. Smart friction is a practice that aims to direct friction toward bad actors trying to complete tasks through your website, digital banking interface, mobile app, and other digitally connected touchpoints. What makes smart friction “smart” is that these processes introduce inconveniences and barriers that are insurmountable or highly difficult for hackers to circumvent, but not your customers. In an age of swift digital banking, excessive friction can work against popular solutions like fast payments and online transactions. How Smart Friction WorksFinancial institutions already have security measures in place to guard against fraud, with certain activities triggering fraud alerts. Smart friction uses AI to take it a step further by identifying potentially suspicious activity and then applying additional security measures like extra confirmations. This means analyzing factors within authentication and transaction processing — like source devices, locations, transaction types, and behaviors — and then introducing interventions when things look suspicious. For instance, a legitimate customer who logs into their banking app from their usual device and location can be authenticated easily with their typical login method. On the other hand, a user attempting to access the same account during overnight hours from an unfamiliar device with a foreign IP address would be faced with a myriad of hurdles to log in. These could include requiring biometric authentication or validation codes through push notifications to the account owner’s mobile device. In the unlikely event that the bad actor is able to gain access, any transactions they try to process might be subject to temporary holds while the financial institution attempts to contact the customer and verify the transaction was made by them. This adds a lot more friction, but it also adds a lot more security. The goal is to keep bad actors out of your community financial institution’s (CFI’s) systems while continuing to give your real customers the high level of service they demand.Methods To Implement Smart FrictionImplementing smart friction enables CFIs to strengthen security without frustrating users. The key is to balance security protocols with customer convenience by using strategic, adaptive approaches. Below are practical methods for introducing smart friction effectively:
- Adaptive authentication. Adaptive authentication applies variable security checks based on the risk detected during a transaction. For instance, a login from a trusted device might only require a single password, while a transaction from an unknown device triggers multi-factor authentication (MFA). This method ensures security measures are only intensified when necessary, keeping customer experiences seamless for low-risk activities.
- AI-driven risk assessment. AI-powered tools analyze vast amounts of data to detect fraud in real-time. By monitoring user behaviors like typing patterns, navigation paths, and device attributes, AI identifies anomalies that indicate potential fraud. When risks are flagged, smart friction is introduced — for example, requesting additional identity verification or placing a hold on suspicious transactions. The system learns and refines its accuracy over time, reducing false positives.
- Collaboration with user experience teams. To ensure smart friction aligns with customer expectations, CFIs should work directly with user experience (UX) specialists. This collaboration allows institutions to design friction points that feel intuitive and non-intrusive, such as invisible CAPTCHA tests or dynamic customer prompts. UX teams can also help test and fine-tune these measures to minimize disruptions.
- Context-aware verification. Introduce step-up verification for specific high-risk scenarios. For example, users making their first wire transfer or large transactions may be prompted to speak with a live agent. Alternatively, a one-time password (OTP) sent to a registered device can confirm a customer’s intent to proceed, adding an additional layer of trust.
- Continuous optimization. Smart friction is not a one-and-done solution. Regularly evaluate its impact on both security and user satisfaction. Collect feedback, monitor metrics like fraud prevention rates, and refine thresholds for triggering friction. This ensures the system evolves alongside emerging fraud methods and customer needs.
By leveraging these methods, CFIs can effectively balance security and user experience. Thoughtful deployment of smart friction ensures customers feel protected without being burdened by unnecessary hurdles, solidifying trust and loyalty.The Balance of Speed and SecurityWith the increasing demand for faster transactions and seamless digital banking, smart friction serves as a vital solution for CFIs. It enables CFIs to meet customer expectations for quick and hassle-free experiences while maintaining the highest levels of account security. By tailoring friction to the actual level of risk, CFIs ensure that legitimate customers can enjoy smooth interactions without unnecessary delays, creating a banking experience that feels both efficient and secure.Smart friction strikes the perfect balance between speed and safety, offering customers the reassurance that their accounts are well-protected without compromising their convenience. This thoughtful approach not only prevents fraud but also builds trust and loyalty, as customers recognize the institution’s commitment to safeguarding their financial well-being. By implementing smart friction effectively, CFIs position themselves as reliable, innovative partners in an era where both speed and security are essential components of exceptional service.
