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Anonymous Identity Verification: A Privacy-Friendly Way to Prevent Fraud

PaymentsJournal by PaymentsJournal
December 13, 2021
in Data, Fraud Risk and Analytics, Video
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Fraud is an ever-growing threat for businesses and merchants alike. Scammers, who are more sophisticated than ever before, are increasingly targeting consumers in their attacks. But with cross-industry collaboration and anonymous identity verification, organizations can stop fraudsters in their tracks.

In an interview with PaymentsJournal at the 2021 Money20/20 event, Shmuli Goldberg, CMO of Identiq, spoke about how organizations across industries can work together to prevent fraud.

More fraudsters are targeting consumers directly

While most consumers have not experienced fraud in the past year, one in three (32%) have. More specifically, 17% of consumers were victims of card fraud, 8% were victims of identity theft, 7% were victims of fake organizations, and 7% were victims of telemarketing fraud.

Fraud prevention efforts once struggled to adapt to fraudsters who took aim at specific use cases and targets. “This initially hindered fraud prevention efforts, [but] it can now be used. Industries need to work together to share data to make good users distinguishable. Cross industry collaboration is key,” Goldberg explained.

Pooling trust does not mean pooling data

Of course, preventing fraud is not as simple as openly sharing data across companies and industries. After all, data sharing brings up obvious privacy concerns for consumers.

According to Goldberg, Identiq rejects the mentality that a large data consortium or stagnant database of user information is necessary to identify legitimate consumers and prevent fraud. “We enable our companies and our network to work directly with each other so that when they see a user for the very first time without sharing that user’s data, they can know exactly how many other members of the network already know and trust this user,” he said.

When a company in Identiq’s network sees a customer for the first time, it can ask other stores in the network if they trust or know that customer. Sensitive data is encrypted to protect the potential customer’s privacy, but still offers insight into a customer’s legitimacy.

For example, if a potential consumer has no digital footprint outside of a dozen travel websites, they may be a fraudster that has targeted the crypto industry repeatedly. If a credit card number is known to dozens of members in Identiq’s network but has never been connected to the email address, phone number, or shipping address inputted into an order, a legitimate user’s credit card may have been stolen.

“This information simply couldn’t be validated before because no data was shared. And I cannot stress this enough: no member of our network ever exposes the end user data when they make a request,” Goldberg said.

No data sharing? No problem

By taking the data sharing constraints out of the identity verification process, Identiq’s members can validate much more sensitive data, such as whether a credit card and email address match up or whether an individual has been recently seen at a specific IP address.

“The joy of living in a world where cloud computing prices are dropping tremendously and network speeds are increasing means that we can apply these battle-proven technologies to an industry that desperately needs to work together but simply cannot share data,” said Goldberg. 

While many companies believe they need an excess of data to keep their network safe from bad actors, this is no longer the case in today’s world. Regulations such as GDPR and CCPA have proven that more data is not always better, and companies across industries do not need to rely on data sharing to reap the benefits of collaboration.

“There are many companies out there, us included, that give you the ability to protect your network and your assets to a higher level of accuracy and to a higher degree and protect the end users on your marketplace with a much higher level of accuracy without sharing any data whatsoever,” Goldberg concluded.

Tags: DataFraud PreventionIdentiqidentity
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