Can Virtual Identities Eliminate Fraud?

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There is no one in the financial services industry that likes identity theft, but after 20 years of watching it climb consistently upward annually, a certain level of acceptance has set in. Fish have swim, birds have fly and fraudsters have to steal consumers’ identities, particularly online where it is much harder to make a positive identification. A real-world merchant has a variety of options for proving to their satisfaction that you are who you say your are – a photo ID, a fingerprint, a full DNA scan – whereas a merchant online has to rely on consumers to create strong passwords and not make the answers to the security questions on their accounts easily guessed or learned.

Last year identity theft fraud was a $21 billion dollar problem, according to analysts, and MiiCard founder, CEO and chief corporate coffee specialist James Varga says the time has come to stop trying to take 5%-10% bites out of the problem and move on to taking bigger, more dramatic swipes at it. MiiCard is global online identity service (IDaaS) platform that guarantees an individual’s identity to the level of an offline photo ID check in an online context.

According to Varga, instead of trying to identify people online by asking them questions, it makes more sense to build consumers “digital passports” as identifiers that are linked to their financial service accounts. In short, Vargas says the service let’s people prove they are who they say they are by leveraging the trust they have with their banks.

Jump to (1.37) “When you sign up for a bank account they do all those extensive checks on you—you know you go into a branch, you show them your driver’s license, especially if it is a brokerage or checking account. So MiiCard to help deal with some of these pains in the market, we leverage the checks that you’ve already don as a consumer as a source of validation for your identity. “

This link to information that has previously been verified by an extremely interested party, in this case a bank complying with “Know Your Customer” rules, represents a vast improvement over current methods, which rely on things like name, address and social security number, all of which can easily be compromised.

(Jump to 6.29) “By not relying on personal information, relying on something only you would know, your access to your online financial accounts that’s a very strong link that provides a huge amount of tracilbilty back to you as a physical person and its much harder, not impossible because nothing is 100% secure, but it is hugely harder to impersonate that that just me knowing a bunch of information about you.”

MiiCard works across borders and vertical—spanning from retail to healthcare in countries all over the world. Varga says there are almost as many issues in security as there are consumers. Recently the first partnered with eMerchant Pay to help payments platform tackle difficulties with “card not present situations.

(Jump 2.31) “With eMerchant pay we are eliminating fraud by introducing this trusted identity that we can provide into the payment space, specifically around auto clearing house payments and credit care payments when the person is not available, so card-not present types of fraud. By providing that trusted identity in that process we offset the risk of the person not being there.”

Varga says that more than reducing fraud, MiiCard also has the potential of changing how some services are offered. For example, because of the access to consumer financial data MiiCard can securely offer, loan underwriting could change its paradigm for assessing borrower eligibility.

(Jump 9.23) With greater clarity on an individuals financial profile the products could be underwritten in a greatly different way than they are today, which is all purely risk based. If was a lender I can look at a consumer an see this person has $200 or $400 at the end of every month, then I can easily give him a loan for $200 because I know he can pay it back.

LendFusion was recently the fist platform to incorporate the MiiCard IDaaS solution.

Varga does not think that through MiiCard’s program all identity theft fraud can be deterred, but he does believe the problem could be reduced by 80%. That at least, he says, is a good start.

To hear the whole PYMNTS interview with Varga click here.

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