In an industry increasingly defined by automation and AI, the human element remains a critical yet often overlooked factor. While fintechs are investing in cutting-edge AI models, automated fraud detection, and real-time financial decision-making, consumer psychology still dictates adoption, trust, and engagement.

At Fintech Meetup 2025, Jeffrey Ott, Senior Behavioral Scientist/Educator at Irrational Labs, made the case that fintech’s greatest challenges—fraud prevention, AI adoption, and financial literacy—are fundamentally behavioral problems, not just technical ones.

Rethinking Fraud Prevention: The Psychology of Financial Crime

For years, fraud prevention has been approached as a purely technological issue—building stronger algorithms to detect suspicious activity, flagging anomalies, and automating risk assessments. But Ott argues that fraud is just as much a behavioral challenge as it is a technological one.

Take the example of payment fraud. Financial institutions often deploy complex machine learning models to detect fraudulent transactions after they occur, yet Ott highlights an alternative: designing preventative behavioral interventions that disrupt fraud at the source.

A simple example? Introducing a moment of friction before completing a suspicious transaction—such as requiring a secondary confirmation or asking a question designed to engage the user’s rational thinking—can significantly reduce fraud attempts.

“This concept has already been applied successfully in areas like misinformation prevention,” Ott explained. “By adding a moment of hesitation, we reduced misinformation spread by 24% on a major social platform. The same principle can apply to fintech fraud.”

Rather than relying solely on AI-driven detection, fintech firms could blend behavioral science into security measures, ensuring fraudsters are met with psychological deterrents as well as technical ones.

AI Adoption: A Human Trust Problem, Not a Tech Problem

Despite the rapid development of AI-powered tools, financial professionals and consumers alike are hesitant to fully embrace AI-driven decision-making. The reason? It’s not the technology—it’s the trust factor.

Companies invest millions in AI underwriting, predictive analytics, and automated financial services, yet users often resist relying on AI for high-stakes decisions. This is where status quo bias—a cognitive tendency to favor existing methods over new ones—plays a major role.

Ott explained that many fintech firms expect seamless AI adoption, only to find pushback from professionals accustomed to traditional decision-making models.

“We’ve seen fintechs introduce powerful AI tools, only to struggle with adoption internally,” he noted. “Employees don’t trust AI to make decisions that were previously based on human intuition. Behavioral science can help bridge that gap.”

One approach involves reframing AI not as a replacement for human judgment, but as an augmentation tool. Ott has worked with fintech firms to design behavioral strategies that make AI suggestions feel more advisory rather than prescriptive, increasing user confidence in AI-driven decisions.

By focusing on trust, transparency, and user experience, fintech companies can accelerate AI adoption while reducing resistance from both employees and consumers.

From Behavioral Nudges to Industry-Wide Impact

Looking ahead, Ott sees behavioral science becoming a core pillar of fintech innovation. Firms that design their experiences with behavioral insights in mind—whether in fraud prevention, AI integration, or customer engagement—will gain a significant competitive advantage.

“Fintech is at a turning point,” Ott said. “The companies that succeed won’t just have better technology. They’ll have better-designed experiences that align with how humans actually think and act.”

As fintech continues to evolve, the intersection of behavioral science and AI-driven finance will be key to unlocking trust, adoption, and long-term engagement.

We’re thrilled to welcome Liberis as an official Unofficially Fintech sponsor. Embedded finance is a major theme at this year’s event, and Liberis is leading the charge by providing seamless funding solutions directly within platforms that businesses already use. They’ll be attending Fintech Meetup, talking all things embedded finance, so be sure to book some time with them! 👇

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