Financial institutions are clamping down on fraud by deploying AI tech ahead of holiday season. 

Digital payments and check payments are both under threat as gen AI has given fraudsters new ways to commit fraud, for example deepfakes and check washing, Tim Vanderham, chief operating officer at fraud mitigation company Featurespace, told FinAi News. 

The company is investing in AI to keep up with the changing landscape of fraud. 

“Gen AI is helping us do things more quickly as we are creating more AI models and machine learning, and using that to fight fraud,” Vanderham said. 

Featurespace’s TallierLTM is a gen AI model the company has built in-house that is self-supervised and trained to improve its odds of catching fraud, Vanderham said. 

An LTM, or large transaction model, only uses transactional data, Vanderham said.  

“We’ve trained our LTM on hundreds of millions of transactions,” he said. 

Featurespace’s LTM has been able to improve fraud detection by up to 71% against industry standard models in early phases of testing, Vanderham said. He said the tech is expected to be launched for all clients in the coming quarters. He declined names the company’s financial institution clients. 

The LTM uses AI-driven adaptive behavioral analytics to decide if a transaction is fraudulent, Vanderham said. 

“We model normal behavior at an account level, not only looking at transactional data, but looking at non-transactional data, like adding a payee” or password changes,he said. “There’s lots of signals that could tell you an account has potentially been compromised, because it’s not normal behavior.” 

The gen AI tool and adaptive behavioral analytics can screen all kinds of transactions ranging from automated clearing houses to check payments, he said. 

Check fraud a concern 

Even as payments become more digital, check payments are still growing and becoming more susceptible to fraud, thanks to AI in part, Vanderham said. 

In fact, 77% o fU.S. financial institutions say preventing check fraud has become a bigger priority this year, according to a Nov. 20 report by Featurespace And the share of fraudulent transactions linked to physical forgery fraud or counterfeit activity has doubled in 2025 to 14%. 

With gen AI, “duplication of checks and understanding the check ecosystem with routing numbers, etc., has become easier to do,” he said. “Banks are increasing their focus on check fraud as it is a persistent problem which has been exacerbated by gen AI.” 

According to a Federal Reserve March study, each year, 11 billion checks are written in the U.S. for a total of $27.4 trillion. 

Payment methods are always added, and old ones are never retired to give people the option to use their preferred method of payment, Sara Elinson, managing director and partner at L.E.K. Consulting’s financial services practice, told FinAi News.  

“The older generation still writes checks, and banks have to keep up with their tech to avoid fraud on an existing payment channel for the foreseeable future,” she said. 

The check fraud problem becomes highlighted during the holiday season as people buy gifts, Vanderham said. “It’s a time ripe for fraudsters to attack.” 

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