Building friction-right financial products
How to balance risk and user experience in financial services
It's a reality that financial institutions and fintechs know well: Release an innovative new product or feature, and fraudsters will line up to probe its weaknesses.
For fraudsters, product launches mean a whole new area for organizing a fraud attack. The challenge for product and risk teams isn't just protecting against these attacks — it's doing so while making good on the promise to deliver the seamless experience customers expect.
To strike this balance, product leaders at financial institutions and fintechs are implementing a dynamic fraud prevention tactic that also motivates customer retention: the friction-right experience.
What is friction-right banking?
“Friction-right” is a strategic approach to user experience (UX) design that leverages a specific amount of friction at high-risk moments to prevent fraud. The idea behind friction-right design is that when a financial organization makes the right security request at the right time, it doesn't feel like an obstacle at all — it feels like protection instead.
Your customer experience is only as good as your fraud prevention processes. Unlike other industries where CX is a matter of convenience, in financial services, CX is closely tied to an organization’s ability to protect customer accounts from fraud and unauthorized access. The point of friction-right banking is to do this while maintaining a smooth, uninterrupted experience for legitimate transactions.
Friction-right means finding the approach that is "just right" for your customer.
When a financial product is friction-right, identity verification and authentication measures work in harmony to establish a level of security that works for (not against) your customers. The result is an experience that defends customer accounts and protects their funds without alienating them.
Making sure your risk tolerance and approach are “just right” for your customer is less about finding your footing between two extremes than it is about tailoring the experience to each individual’s risk level as well as the risk level of the action that is being performed.
Add too much friction, and good customers will abandon your onboarding flow. Add too little, and fraud floods in. Either way, without a friction-right CX, the real prospects you spent money marketing to aren’t going to be able to get what they need from the financial product.
Learn about the friction challenge banks face
Essential elements of friction-right design
For a financial product to provide a friction-right experience, it needs to meet certain requirements:
1. Balancing security and UX
Not every user or behavior requires the same level of scrutiny. Friction-right UX design understands where customers need protection and where they need speed.
Risk-based authentication adapts verification requirements based on real-time signals like transaction amount, location, device, time of day, and historical patterns.
Instead of treating every customer and transaction the same way, friction-right banking requires security measures to adapt based on risk signals. For example, a routine bill payment might breeze through without issue. But when that same customer suddenly transfers a large sum to a new account at 3 AM? That's when additional security steps kick in.
This dynamic approach means routine transactions flow smoothly, while high-risk activities trigger appropriate security measures. The goal is to create transparent security processes that build trust while maintaining necessary protection.
Get to know the benefits of dynamic step-up verification
2. Leveraging optimal data processes
A friction-right experience starts with the right data at the right time. Data orchestration helps you do just that. By connecting and running multiple data solutions simultaneously, it creates a more complete picture of a user’s identity and risk level without slowing them down.
Instead of relying on a linear process, data orchestration enables you to layer diverse insights — from credit history to alternative data, such as payroll or utility payments — so your decisions are more accurate, and your onboarding experience remains smooth.
3. Maintaining security through ongoing intelligence
A friction-right approach must evolve alongside customer needs and emerging threats. This requires continuous monitoring of security measures, regular testing of fraud prevention workflows, and the ability to adjust quickly when new vulnerabilities emerge.
Artificial intelligence (AI) and machine learning models can analyze your customer’s personally identifiable information (PII) and historical data in the context of industry-wide fraud trends to spot patterns and anomalies in real time. As fraud tactics evolve, these models continuously learn and adapt, surfacing emerging threats before they hit your radar.
Financial organizations’ understanding of a product’s specific fraud risk will change over time. Your data solutions and AI fraud prevention workflows should be easy to reconfigure, allowing you to continue improving security without introducing unnecessary friction. The key is building that flexibility into your product’s security from the start.
Learn more about the role of data and machine learning in fraud prevention
How to launch a friction-right banking product
Here’s a step-by-step breakdown of how to find the perfect amount of friction for your product and its customers.
Perform a risk assessment
When implementing friction-right banking, start with a comprehensive risk assessment to identify vulnerabilities. This assessment should evaluate potential threats across all customer touchpoints, from account opening to transaction processing.
Consider factors like:
- Current security measures and their effectiveness
- Customer feedback on existing friction points
- Regulatory requirements and compliance needs
- Technology infrastructure capabilities
- Competition's security practices and customer experience standards
Use these insights to map out where additional security measures are needed and where existing friction should be reduced.
Conduct user journey mapping
Understanding where customers encounter the most friction helps identify opportunities for improvement. To determine where security measures will have the most impact with minimal disruption, you can map out your user journey.
Consider key touchpoints where customers interact with your product and analyze their expectations at each stage. Look for opportunities to streamline verification processes while maintaining security standards. This might involve analyzing customer drop-off rates and feedback at various stages of the onboarding and transaction processes.
Assess metrics like the following to help strike the balance between security and user experience:
- Time spent on verification steps
- Abandonment rates at security checkpoints
- Support inquiries related to security measures
- User satisfaction scores for authentication processes
- Completion rates for different verification methods
It’s also important to look at industry trends to inform your journey mapping. According to Alloy’s 2025 report, only 33% of financial organizations say they most commonly detect fraud at onboarding — compared to 56% who rely on real-time transaction monitoring. That leaves a critical gap in the early stages of the customer lifecycle, where fraud can be stopped before a bad actor ever enters your ecosystem. Strengthening identity risk decisioning at onboarding gives you the opportunity to prevent downstream fraud altogether, eliminating the need for recovery or remediation later on.
Download the full 2025 State of Fraud Benchmark Report
Set up adaptive authentication workflows
Adaptive authentication represents a modern approach to security that automatically adjusts verification requirements based on detected risk levels. Rather than applying the same security measures to every transaction or customer action, these workflows analyze risk signals in real-time to determine when additional verification is needed.
For example, routine transactions from known devices might proceed smoothly, while unusual activity — like logins from new devices or locations — triggers additional security steps. This dynamic approach helps financial institutions maintain strong security while minimizing unnecessary friction for the user.
Pressure-test your risk approach
Once your friction-right strategy is in place, you need to validate that it works as intended. Set up controlled experiments to measure both fraud prevention effectiveness and customer impact.
Consider approaches like:
- A/B testing different security measures
- Running simulated fraud attempts
- Analyzing customer feedback and drop-off rates
- Monitoring false positive rates for risk signals
- Tracking verification completion times
Document test results and use insights to refine authentication workflows. Remember that friction-right UX design requires ongoing optimization as threats and customer needs evolve. Use any insights gathered to fine-tune your approach, adjusting security measures based on performance data rather than assumptions.
What makes a good testing suite? Here’s what we built into Alloy’s
The key to getting friction right
Friction-right banking means adding security measures when and where they matter most. Financial products that are the most successful at identifying and combating fraud use intelligent authentication that adapts to risk levels — protecting customers while maintaining a smooth UX.
Like fraud tactics themselves, your approach should continuously evolve. The best way to do this is through consistent testing and optimization in a secure environment. By pressure-testing your fraud prevention workflows before deployment, you can validate that new security measures effectively stop fraud without creating unnecessary barriers for good customers.
As a leading identity and fraud prevention platform, Alloy’s SDK gives you access to 250+ traditional and alternative data solutions through a single integration. By connecting with leading global data and technology providers, Alloy makes it easy to build and adapt fraud risk workflows — whether that means layering in step-up verifications like multi-factor authentication or tapping into new datasets to stay ahead of emerging threats.
Ready to launch a friction-right financial product?
Learn how Alloy’s identity and fraud prevention platform works with your existing tech stack to help you deploy friction-right banking solutions that protect your organization while delighting your customers.
KJ McAlpin is a content marketing manager at Alloy. They research and write about trends in the fintech and banking space. In their free time, KJ enjoys traveling, cuddling their two black cats, and journaling.
