What Is Digital Trust & How Does it Prevent Fraud

You rarely meet your customers anymore. In an age of apps and online banking, most transactions happen without eye contact, handshakes, or even a voice. While this digital shift makes things faster and more convenient, it also leaves businesses blind to who’s really on the other end, opening doors to identity theft which cost  organizations and consumers $5.3 billion in fraud losses. That’s why digital trust—your ability to verify identity and intent without ever meeting in person—is no longer optional.

Think of it as a digital handshake: invisible, but essential. Digital trust is what allows businesses and customers to work together confidently in a world where face-to-face is the exception, not the rule.

Key Takeaways

• Digital trust is a principle that allows businesses and customers to transact securely when the two parties are unlikely to meet face-to-face.
• Digital trust relies on two key components. First, a person on a digital channel is who they claim to be; second, they are allowed to perform specific financial transactions.
• As more people engage with businesses and banking online, digital trust is an essential safeguard for organizations to prevent account takeover and new account fraud.
• Digital trust operates under four key components: behavior, biometrics, device, and IP.
• Assessing changes across these key components can help banks determine if a customer’s risk level is changing and whether to approve or flag a transaction.

What is Digital Trust?

Digital trust is the principle that online interactions and transactions are secure, reliable, and conducted with integrity. It hinges on two key components. First, that a person online is who they claim to be; second, they are allowed to perform the requested financial transaction. 

Digital trust benefits both businesses and their customers. As fraud and scams grow increasingly sophisticated, individuals need to feel safe when banking or shopping online. Customers expect the organizations they patronize to recognize their normal purchasing and financial activities and quickly catch strange behavior.

Businesses can do this by creating a digital profile for each customer, starting at onboarding and continuously updating it over time. Every interaction, device used, or address change helps paint a clearer picture of what’s normal for the customer.

Why is Digital Trust Important?

As in-person interactions decline, digital trust is essential to keep business and financial transactions safe from fraud. Here are the three key reasons companies and banks should implement digital trust.

Fraudsters Target Customers with Scams

Banks have heavily invested in fraud detection solutions, making it harder to attack systems directly. As a result, criminals are setting their sights on the next most vulnerable target: customers themselves. Customers are people and susceptible to manipulation and coercion. Fraudsters often use impersonation scams to prey on customers at critical moments, like during a medical event or a natural disaster.

Banks Intervene in Customer Transactions Too Often

Trust is essential for banks to allow customers to transact as they want without significant interference. Multiple authentications creates a friction-filled experience that irritates customers and makes them annoyed with their bank.

Customers Expect to Be Trusted

Customers also believe their banks should know who they are based on their existing data and history. They believe banks should be able to use this information to recognize unusual activity, like a high-value transaction from an unfamiliar location. 

How Digital Trust Prevents ATO and Account Opening Fraud

Digital trust is essential in stopping two persistent fraud tactics: account takeover and account opening fraud. 

Account Takeover Attacks

Account takeover attacks happen when a fraudster gains unauthorized access to a customer’s bank or online account without permission. Once they have access, criminals can make purchases, transfer funds, or steal sensitive information.

Years of data breaches have exposed vast amounts of personally identifiable information (PII), making ATO fraud easier and even more tempting for fraudsters.  

New Account Fraud

With large amounts of personal data available, fraudsters can also commit new account fraud. This type of fraud is especially challenging as many banks or businesses have limited historical data to assess a new customer’s risk level. Synthetic identity methods often enable new account fraud in which fraudsters build new personas based on different pieces of stolen information.

These insights show how important it has become for banks to trust the person behind the device.

Given the rapid increase in fraud attacks, banks must step up authentication processes throughout the customer journey. These include:

• Multi-Factor Authentications
• Face ID Verifications
• Fingerprint Scans
• One-Time Passwords
• Limited Login Attempts
• Manual Reviews

However, these steps risk adding friction and preventing customers from having a great digital experience. Digital trust analyzes customers’ activities in the background, creating a more seamless and streamlined journey. Financial institutions can detect suspicious patterns that indicate potential fraud or high risk by looking at customers’ identities and behavioral digital activities.

Traditional assessment techniques frequently fail to meet most digital banking systems’ speed and scalability requirements. More advanced methods like machine learning algorithms and highly accurate profiling can help banks evaluate customers’ digital trustworthiness. 

4 Key Components of Digital Trust

So, what goes into building strong digital trust between banks and customers? The key principles of digital trust are a combination of four central components. 

Behavior

Particular events can help us to determine if ATO attempts are in progress.

Examples include:

• A significant number of login attempts are made outside regular hours
• The velocity between a login and a payment is much faster compared to the average velocity between events
• A spike in password reset events
• Signs of activity automation

Biometrics

The ability to identify patterns in the customer’s normal digital activities.

Examples include:

• Pressure, typing speed, and the rhythm applied to a user’s touchscreen 
• Timing, pressure, and length of keystrokes applied to a keyboard
• Speed, acceleration, and path of mouse movements
• Orientation, grip, and tilt of a user’s smartphone or other handheld device

Device

Data elements related to the customer’s device information.

Examples include:

• Changes in screen resolution and device language settings
• Unknown device type — for example, switching to a different device from Android, iOS, or Windows Mobile
• Risky activity with a rooted device
• Phishing or Malware activity detected

IP

Data elements are derived from the customer’s IP address.

Examples include:

• Unusual location for monetary and non-monetary transactions
• New ISP providers or hot-spot connections
• Risky activity with a Proxy server or Tor connection
• Fast traveler activity, e.g., multiple logins from infeasible geographic locations in a short period

By assessing how these different components shift over time, banks, financial institutions, and other businesses can better understand how a customer’s patterns are changing. Sudden shifts can change the customer’s risk level and raise a cautionary flag before approving a transaction or transfer.

How to Get Started Implementing Digital Trust

While digital trust is not the final answer to stopping scams and preventing fraud, it is critical for banks to deliver a strong customer experience and boost customers’ confidence in their brand. Here’s how financial institutions can implement strong digital trust practices in three steps.

Start at Customer Onboarding

Approving a high-risk individual is the last thing a bank wants to do. That’s why digital trust must start at the onboarding stage. After all, preventing a risky customer from onboarding in the first place is easier than offboarding them later. Digital trust must begin on day one by understanding the customer’s risks. It should also consider their behavioral tendencies to leverage at future interactions.

Personalize Customers’ Warnings

Customers have come to expect more personalized services. Warnings over payments are no exception. Shifting away from generic warnings to offering more customized messaging goes a long way toward building digital trust with customers. Let’s say a customer shifts from their standard routine. They will likely be grateful if they believe their bank understands their typical patterns and is looking for extra authentication before approving a transaction. 

Know Your Customer Across All Channels 

Customers transact across multiple digital channels from different devices. FIs must understand how customers use their devices at each interaction to confirm who they really are. Each digital interaction creates a profile of how the customer usually transacts, which evolves with time. With this understanding, FIs can better protect their customers across all channels and trust that they are interacting with a legitimate customer, not an imposter. 

The days of meeting customers face-to-face are few and far between. Banks, businesses, and financial institutions can’t afford to cross their fingers and hope they’re transacting with trustworthy individuals. Digital trust must be front and center of digital identity and authentication for banks and customers to transact with each other confidently. In-person encounters with customers are less common. But that does not mean today’s virtual handshake has to be any more impersonal.

Related Resources

• Blog: What Is Behavioral Biometrics and How Does It Work Against Fraud?
• Solution Guide: Feedzai’s Digital Trust Solution
• Solution: Prevent Account Takeover with Behavioral Biometrics