Amid mounting fraud concerns, Citizens Bank finds that the perception of friction in digital banking is shifting.

Financial fraud losses hit $12.5 billion in 2024 and are expected to worsen in 2025 as scams become increasingly sophisticated, according to a March 28 report from cloud-based digital banking solutions provider Alkami.

Three defendants accused of conspiring to scam banks pleaded guilty this month to more than $1.7 million in fraudulent transactions, according to a March 20 release by the U.S. Department of Justice.

To stay ahead of evolving security threats, Citizens began modernizing its fraud management system in 2023 to streamline and improve claims processing, the bank said last month.

But streamlining fraud prevention doesn’t mean cutting corners or removing safeguards, Jen Martin, head of fraud and disputes at $217.5 billion Citizens, told Bank Automation News.

“Obviously, we always think about friction. We want our customers to be able to transact smoothly,” Martin said. “But I do think the concept of friction is somewhat changing in the industry.”

For example, consumers have become accustomed to security enhancements such as one-time passcode requirements, which may once have been viewed as added friction, said Martin, who has a background in criminal justice.

“Gone are the days when frictionless is the best experience.”

— Jen Martin, head of fraud and disputes, Citizens Bank

Securing trust

In fact, consumers will sometimes reach out to the bank to make sure their login is secure if they don’t receive a prompt they were expecting, such as a one-time passcode, she said.

“I think consumers are very in tune with how to keep accounts secure, and they are looking to us to have those security features,” she said.

In fact, 91% of digital banking users consider protection against unauthorized third parties a critical aspect of their banking experience, according to the Alkami report.

The challenge is finding the right amount of friction to ensure consumer trust while delivering a seamless experience, Martin said.

“If we’re going to put authentication friction into the flow, we want to make sure that it works 100% of the time so that the customer can cleanly authenticate and move on,” she said. “But then, conversely, if you’re a bad actor trying to take an account over, we want to make sure it’s there to stop that behavior as well.”

Citizens’ safeguards for consumers include:

• Secure Sockets Layer (SSL) encryption;
• Two-factor authentication;
• Real-time alerts;

Optional account tools such as ACHieve Access for monitoring Automated Clearing House transactions and Positive Pay for reviewing checks.

Keeping up with AI

Citizens is also using generative AI to assess the evolving fraud landscape, which includes AI-powered scams, Martin said.

“Back in the day, you would have to have an analyst pull down a month’s worth of data,” to determine where to apply better safeguards, she said. “And now, with some of these tools, you can get to those answers faster. You can consume considerable data and have output that’s usable.”

Other FIs tapping AI for fraud prevention include:

• $1.4 trillion Deutsche Bank;
• $678 billion U.S. Bank;
• $1 billion Neighbors FCU;
• Visa; and
• Mastercard.

“If you want to keep pace, you’re going to want to adopt some AI solutions,” Martin said.

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