October 29, 2015
The LTP team recently interviewed John Dancu, CEO at IDology, on the strategic investment in Payfone and the identity verification industry. Here is the transcript of the interview with John:
LTP: Could you please give us an overview of the company & the industry you are in and your experience?
John Dancu: We have been in the identity verification industry for over 10 years and have established a leading position in this space. Our customers include financial services organizations, retailers, prepaid companies, medical companies, among others. We solve a very horizontal problem. Over the years, we have added fraud metrics to our platform in order to address evolving fraud issues and the growth of widespread data breaches which has caused a wide variety of legitimate consumer data to become available for purchase on the dark web. This stolen or breached information, once a fraudster gets their hands on it, becomes what we call a perfect identity. Basically, it has enough qualifying identity information to be able to access or open accounts, file a fraudulent tax return or medical claim, and more. Our platform went through numerous shifts relative to how we address these evolving issues and how we approve legitimate customers and stop these very sophisticated fraudsters – which, in many cases, is their full-time job. The struggle with mobile is that there aren’t many good sources & solutions out there that help address our customers’ needs relative to strengthening the identity verification process and helping with ongoing transactions. Establishing a persistent mobile identity is a complex issue given the rise of account takeovers, improved mobile spoofing technology and the millions of change events that occur with mobile devices. We discussed it a lot with Roger (Roger Desai, CEO of Payfone); it made a lot of sense to take what we have done and what he has done to try to wrap things a little differently and add a little spice on it compared to what people do. We thought of this investment as a mechanism to show our seriousness to Roger and our eagerness to collaborate with his company.
LTP: What is the value that your investment and collaboration with Payfone adds to the customers?
JD: With this investment, we added Payfone data and solution to our platform, integrated it and made it more accessible for our customers. Let me give you a use case for a better understanding of what we are doing. We handle many prepaid cards. People take a prepaid card and put in their data: name, address, other information, and IDology helps to validate that customer. The mission is to make sure that there are no fraud indicators associated with that transaction. The first step happens when prepaid companies are verifying the identity of the customer. The logical next step is binding the consumer’s identity to their mobile device. All of this data is pulled together to create a mobile identity for that consumer. And, this mobile identity is persistent because it moves with the consumer as they change devices, carriers, swaps their sim card and more. In the mobile commerce environment, we open an account, then we establish persistence on the mobile device, and when a user comes back to perform the transaction on the mobile device, we make sure that the user is the same. It is an easy and frictionless way to validate that the user has established persistence before. It also gives an opportunity to skip asking for a password from someone who just wants to see his or her balance on the prepaid card, for example. Ease of use and establishing the persistence are key points here. What happens when I initiate a worldwide transfer, and change a significant factor on my account? We then have an ability to check, on a real-time basis, if there have been any changes or verification issues that would give a business cause for concern that the account is experiencing an account takeover. With fraud, you want to have more and more layers to say that yes, you are comfortable with the identity that is coming from this device.
LTP: How are the same issues with identity verification addressed in the market? How are the companies solving the problem of authentication different from IDology?
JD: We focus on mobile device transaction processing. Today, we can pull attributes of the phone that will give you some comfort that the transaction is made from the same device: device fingerprint. However, the problem is that a device fingerprint on laptops and desktops has tenure. You can change your devices every year and usually, there is some visibility that you have due to the device. All the information that you have vanishes; it just goes away. The benefit of mobile and binding into a persistent mobile identity is that it does not vanish. And that’s the real attraction here.
LTP: What are the milestones and new partnerships you are looking at for the company? Where do you think the identity verification is going in the future, how is it going to change?
JD: IDology is going to continue heavily on what made us successful in identity verification combined with really strong fraud tools. That problem is continuing to evolve and continuing to get more complex. Another one of the products we recently launched allows us to look at the email address and say if it has patterns indicative of fraud. What we are going to continue to do is to build upon our platform, and I think the attraction that we have for working with Payfone is that we are doing the best on our side; they are doing the best on their side. What Roger has is unique—historical data and the intelligence of the way they use the data. I think that is a big differentiator from other providers that are trying to do mobile authentication. IDology with continue to build more and more layers in addition to what we do with the Payfone.
LTP: Sometimes people use identity and authentication interchangeably. Is that fine or is there a certain difference between those?
JD: That is a good question; you have to be careful with that. What we do is identity verification through our platform. Authentication can come in many ways. When you put your email and password in Facebook, you are being authenticated. What we are doing is actually going through real-time sources and robust fraud prevention analytics to verify that person is who they say they are. We do dynamic identity verification.
LTP: When you are adding layers to the process of identity verification, you are making it more secure. However, what are the downsides of the process of multiplying layers?
JD: When it comes to identity verification, we want to have many layers. However, we need to make the identity verification process as easy as possible for the legitimate consumer without added unnecessary friction. One layer is no longer sufficient to catch fraudsters When we talk about identity verification, we look at many factors – device, identity activity and location attributes so that our customers can dynamically decision to move to higher levels of verification based on risk profiles. This allows the good customers to easily access products and services while raising the level of friction when suspected fraud is present. We are using real-time resources; looking at other factors that are going around the transaction.
LTP: Do you see companies joining hands to make identity verification easier, more efficient and secure?
JD: We actually do that today; we have a collaborative fraud network where we help organizations fight fraud on a collaborative basis. We have an ability to see repeated activity across the network. We see fraudsters going from company A to company B and company C, and we see commonalities in fraud activities. That is one of the advantages of IDology. As the company continues to grow, the power of the network has gotten stronger and stronger.
LTP: What are your international plans? Are you planning to look at other regions, India in particular?
JD: Yes. Today, we actually conduct business in UK, Canada and Mexico. We have some products that are international and we are going to continue to build on that.