The average eCommerce retailer losses more than 3 percent to fraud each year, but WePay is hoping it has a solution for its merchant customers with Veda. The new social network analysis tool allows the payment company to verify accounts, and it was unveiled this week after months of under-the-radar work.
WePay calls Veda an “intelligent social risk engine,” and with the launch, WePay joins other notable ventures such as Affirm and Signifyd that have aimed to leverage social data more effectively in the payments industry.
According to the company, Veda combines traditional business data with social information to catch fraudulent merchant accounts, and so far, it says Veda has proven to be a success. Since service testing began last October, WePay says Veda has successfully stopped $30 million in attempted fraud by analyzing more than 250,000 transactions per month.
In response to the launch, PYMNTS.com spoke to WePay founder and CEO Bill Clerico, who discussed the impact he expects Veda to have as well as what he considers the future of the service in fighting online fraud.
PYMNTS.com: Using social data to fight fraud is still a fairly new concept, even to insurance companies, do you expect any resistance on the part of merchants when it comes to embracing this approach?
Bill Clerico: We have not had any objections from our customers. We are actually asking for much less data than the typical merchant account application (only five fields – first name, last name, name of business, email address and phone number) and then using a lot of publicly available social data. So, what we’ve seen is that we’ve been able to provide a much better, faster and simpler experience and settlement to customers because of that – ultimately benefitting the end merchant.
What do merchants stand to lose by not becoming early adopters on this trend?
Veda is something that is just used internally by WePay to mitigate risk of processing the payments of our own customers – so merchants don’t necessarily have to do anything different. That being said, we believe that using social data will be the future trend in many industries and that merchants with more social data and validation may see better experiences or better access to different products and services. We are already seeing several companies using social data for different ends – such as On Deck and Kabbage (loaning money to small businesses).
You refer to Veda as a “brain,” why is this the best description for the new tool?
We refer to Veda as a brain because of its ability to intelligently evaluate risk using our internal algorithms and pattern match. Additionally, as Veda analyzes more and more data, it is getting smarter every day – so Veda will be continually improving. Veda is a sanskrit term meaning knowledge or wisdom, so it became a name we started using internally to refer to this “brain.”
You mention that Veda uses only five fields of information to look for cases of fraud. Why did you choose to exclude the other 16 fields other payment companies require? Also, how did you go about determining which fields to exclude?
We wanted to make it quick and easy for small business service providers to start accepting payments, so we only ask for the most basic information that we need in order to gather additional information that is publicly available. The five fields we picked were the only ones we needed as key tokens to mine the publicly available social web. For example – with an email address – you can often match to Facebook, Twitter, etc. If we find that things don’t match or that there is high risk associated with the data we find, then we might ask for additional information.
According to your press release, Veda has been operational since October, why the long wait before formally unveiling the tool?
Veda is something that we’ve been working on for a while but we felt that it was now at a stage where we had seen lots of proof points that it was working very well. As you might imagine, a risk engine like Veda has to be tested with real fraud and [at] enough volume to validate its strength – which is what we’ve now done.
How do you expect criminals to evolve now that Veda is in use? Are you already trying to predict the next moves of these individuals? If so, how do you see Veda evolving over the coming months or years?
Online fraudsters are very sophisticated and always getting more sophisticated. One of the things we are constantly doing to keep ahead of fraudsters is to use more and more of the new publicly available data and technology – so we are constantly investigating new sources of data to use in Veda. For example, as new location data or new kinds of social data come up – we build that into Veda.
Bill drives WePay’s vision, strategy, and growth. Before joining WePay, Bill worked in technology investment banking at Jefferies & Company, where he advised enterprise software, digital media, and financial technology companies on M&A and capital market transactions. Previously, he worked for the U.S. Army’s Communications Engineering Research Command and in electronic trading at Goldman Sachs. Bill and Rich Aberman (WePay COO and co-founder) were named two of the Best Young Tech Entrepreneurs of 2011 by BusinessWeek.