Every two seconds another person becomes a victim of identity theft. No wonder identity theft is the greatest fear in the world, according to a global survey by Visa/Harris Polls. Losses mount up to several billions of dollars a year. Yet, more than 1.5 billion people consider credit and debit cards the most convenient way to exchange money, much safer than carrying cash.
Although there are many companies putting their fingers in the dike to prevent and catch fraud, a new solution is stirring up the banking and payment industry.
The big buzz in the US began when Security Identity Systems (SIS), based in Brentwood, Tennessee, a subsidiary of FNB Merchants (an affiliate of FNB bank) announced in March an exclusive US licensing agreement with mConfirm, for its double smart detection system.
Now located in Tel Aviv, mConfirm began as a Jerusalem start up with seed funding from Jerusalem Venture Partners.
“Our system works in real-time to prevent fraud at the point of sale and at ATM sites,” said Laurence Neumann, mConfirm’s CEO. “It uses two powerful factors-a cellular authentication analysis and a location-based analysis. They are highly effective when combined.”
Neumann, South African by birth, and with an advanced degree from MIT in Boston, held senior positions in Reuters, the global information company, before joining the young company, established in 2004 by Tomer Eden and Boaz Avigad.
Tested at Visa Cal, Israel, the technology reported excellent results, verifying identity in some 90 percent of the cases. No other system comes close.
Zvi Meshi, chairman of the mConfirm’s board, was former CEO of Visa Cal and the chairman of Diner’s Club Israel. He is currently CEO of SafeCharge, for internet transactions. Meshi has been a strong proponent of Smart Credit Cards.
“Bryan Ainsley, CEO of SIS, saw the potential for the product early in development,” commented Neumann.
Phishing aside, identity theft has become the No.1 reported crime in the US. The big heists are stolen information from databases, stolen computer, or data stolen by employees, and sold to criminals. “One of the most insidious thefts is of small amounts of money from multiple accounts,” said Neumann.
The system uses patent pending algorithms utilizing neural networks, artificial intelligence, and data mining. “It uses Geo Spatial (location) data as a major input in purchasing analysis. Included are time, place, type of purchase and sequence of behavior. This is transparent information that is already in the system,” explained Neumann. “There is no issue of invasion of privacy.”
Although the system can operate with this module alone, the identity authorization system that is based on the card holder’s cellular phone at the time of a transaction (as long as it is on), gives the system an extra powerful authentication factor.
In seconds, from the moment the card is swiped, the mConfirm system makes an authorization decision. Here is how it works: 1) Point of sale device contacts the credit card company; 2) the credit card company sends details to mConfirm server; 3, mConfirm’s server sends a location request; 4) the cell company determines the location of the phone; 5)mConfirm server analyzes transaction; 6)the decision for or against the transaction is made by the issuer.
The technical innovator behind mConfirm’s technology is Tomer Eden. Founder and computer whiz, Eden is a seasoned developer whose previous startup provided cellular micro-payment.
“We see savings on three levels: reduction of costly false alerts, detection of previously hidden fraudulent transactions, and enhancement of other systems in place,” said Neumann.
Within six months, mConfirm hopes to have its e-commerce system ready for market.
Deals have already been made in Spain, Greece, and Italy with leading integrators who are cooperating on developing opportunities. Negotiations for pilot installations with 30 top tier banks in Europe are moving along. mConfirm is now looking to raise Series A funding.
High praise has already come from Avivah Litan of the Gartner Research group in Boston. Quoted in The American Banker , she said: “The technology is based on proven principles of authentication. I think it is fantastic technology because it has a second factor… It is all that we preach about.”