There are many ways to trap fraudsters and stop them in their tracks. One of newest arrows in the quiver is Social Biometrics – using a person’s digital footprint to validate digital identity. Socure CEO Sunil Madhu sat down with PYMNTS to discuss why adding social is helping to financial institutions fight the good fight against the threat and fueling financial inclusion as a result.
PYMNTS: Everyone has a different way of approaching the fraud problem. How do you help companies battle the fraudsters?
SM: Socure is an identity verification platform, we help enterprises figure out if their customers are who they say they are. We use trusted online and social data and checks to do that in real-time.
For the last 50 years, the risk decisions used by enterprises in developed countries have been primarily credit-focused and have primarily centered on offline data. In the last 50 years, if you signed up for a credit card somewhere or you decided to open an account, the personal information (name, address, phone number, etc.) that you passed to the financial institution is then passed to a credit bureau or data broker. Those companies then attempt to match that data with the offline data they have about the consumer. If there’s a match they tell the institution the identity is verified so they can proceed with onboarding.
The problem is that much of the data that the credit bureaus have been operating with has been stolen or compromised in recent years by data breaches – so that data is easily available to fraudsters. There’s so much data about the U.S. population out there now that “fraud-as-a-service” is actually a business model. To be a fraudster, a fraudster doesn’t have to commit fraud themselves, they can pay someone to do it for them. What’s more is that all of this information can be purchased for under $5 per identity from a lot of these shadow dark websites.
PYMNTS: You describe one of your core capabilities as social biometrics – what is that and how does that factor into identity verification?
SM: Financial institutions are no longer solely dependent on credit details for financial inclusion and onboarding services. They are looking for alternative data sources that allow them to make their risk decisions in the same manner. So, this is where we began looking at online and social data’s utility.
The Internet is 25 years old and every one of us has digital footprints on the Web. Through testing and research, we found that the use of these digital footprints as predictors for risk is really good — in fact it’s better than using offline data. The models we created using this online and social data to predict fraud ended up outperforming the models at the top issuing banks, credit bureaus and card networks.
With our new release, we’ve recently gone back and added more data from email, addresses, phone and other digital mediums; adding that data to social has shown the most outstanding results to date.
Let’s say that someone were to steal your identity tomorrow and they began applying for credit cards without your knowledge. With our platform, we can actually look for the social proof for that identity by looking online side and at the side of that identity that the fraudster is presenting. If we were to take the attributes of the stolen identity versus the real identity and project them into the Internet to see the online social proof and compare the digital footprints, we would see some big differences between the two.
The real identity has real friends and family on some of these networks, has had a career and people vouching for them on professional networks like LinkedIn, so the real person actually has strong connections between people that they have managed to make over a long period of time in the real world. Whereas these fake and stolen identities that are altered, they don’t have the same level of proof because the fraudster would have to create hundreds of fake identities just to vouch for one. Creating hundreds of fake profiles that interact with each other in human, nuanced ways is very difficult, time-consuming, expensive and next to impossible, especially when you look at doing that across multiple networks.
This is what we call social biometrics – the analytical evidence behind the strength of people’s connections across a variety of networks online. It’s also the patented and trademarked name that describes our platform that combines trusted online and offline with information about social proof to be able to validate a digital identity.
PYMNTS: How does this help promote financial inclusion?
SM: Unfortunately, the way most systems work is that for every one person you stop for real fraud, you’re rejecting something like 15 to 20 good people because of false positives. Our solution can not only reduce the fraud, but also allow more people onto financial inclusion.
People with very little credit history, such as millennials (who comprise 3.5 billion people in the world) are subjected to a lot of friction when being onboarded and typically are asked for more documentation or to turn up in person. We want to eliminate that as well as enable people in the 180 countries without credit to be able to be serviced by institutions. By combing their history of email, phone, address social media and other data captured from their “digital exhaust,” we gather a digital identity for those people. It’s that digital identity that can be relied upon to form a better basis for authentication to power financial inclusion for the unbanked and underbanked around the world.
PYMNTS: What new technologies or innovations do you see on the horizon for the fraud prevention/detection market?
SM: We believe that what we are creating today is the future of fraud prevention and identity verification. The banking and the payments industry are being entirely disrupted. We are seeing the emergence of a variety of new ways to pay and accept payments. There’s a lot of changes happening in the financial services industry and these changes require the consumption of as much information from as many different sources as possible in order to make the best decisions.
Digital identity is poised to be that primary source as opposed to offline data, the reason being is that 180 countries in the world don’t have credit systems. Even as credit bureaus attempt to enter one of the 180 countries without credit systems today, the first place they try to acquire trustworthy data is from banks and telecom companies, but unfortunately in these emerging markets most people are on the unbanked, on the prepaid side of telecom, so there isn’t any data creditors can go and get in order to set up credit infrastructures.
These countries have now taken it upon themselves, as eCommerce and mobile penetration is growing and new payment technologies are arriving, to create pseudo credit infrastructures. China announced just two months ago that they were going to use data from Alibaba and Tencent in order to create a credit scoring model for Chinese citizens; India is trying to do a similar thing. We know the utility of the data is there and we know the problem is acute worldwide, so using this type of data, what we call digital identity, is the future of identity verification.
PYMNTS: Without giving too much away, can you give us an idea of what everyone can expect to see from Socure at the Innovation Project 2016 Innovator Expo? What are you looking forward to most at this year’s IP?
SM: We’re excited to speak about protecting payments, financial inclusion and more. We are going to showcase a couple of new solutions that we’ve released into the market around identity verification and fraud prevention, as well as authentication for transactions using facial recognition. We launched a project at Finovate last year called Perceive, which allows people to initiate and fulfill high-risk, high-value transactions by simply looking into their mobile device for a few seconds, a pay-with-selfie type of idea. We are looking forward to a lot more exposure in the market and bringing more awareness to our brand.
Socure will be among the innovators participating in the Innovator Expo at this year’s Innovation Project, taking place March 16-17 at Harvard University.