Companies are using social media to combat online payment fraud, which cost an estimated $3.5 billion last year

June 14, 2013 Leave a comment

Using Social Media to Stop Online Payment Fraud

By Danielle Kucera on June 13, 2013

Users of Facebook (FB), Pinterest, and Twitter share personal details every day. Now credit bureaus and payment companies Equifax (EFX), EBay’s (EBAY) PayPal, WePay, and Intuit (INTU) have begun trials to see whether social posts can help prove identities or detect whether customers are lying about their finances. “We are investing a lot in how can we use unstructured data that is sitting out there in social media that can help us understand a little more about identity,” says Rajib Roy, president of Equifax Identity and Fraud Solutions. Fraud cost U.S. online retailers $3.5 billion last year, according to payment processor CyberSource.While the companies can access only public information or what people choose to share, a great deal is readily accessible. Many young people allow the public to see certain parts of their Facebook profiles, as well as accounts on Twitter andLinkedIn (LNKD). Consumers also leave traces of themselves on blog posts, Yelp (YELP) reviews, and online forums. Public data can include photo tags, locale check-ins, and a person’s network of friends. Facebook and LinkedIn provide software tools that let companies automatically import information from profiles on the social networks—with users’ permission—and consumers are allowing this more often, opting for the ease of signing into a website through Facebook, for instance, instead of filling out a separate form.

Intuit, the largest seller of personal-finance software and a provider of payment systems, has begun using LinkedIn to help verify the identities of users, whose profiles on the site list detailed employment history and often include endorsements and recommendations from colleagues. “There’s definitely enough meat on the bone there,” says Ken Miller, vice president of strategic risk services at Intuit.

Equifax is teaming up with government agencies, both state and federal, to help detect whether citizens who are receiving benefits are truly eligible. The bureau must verify identity, state of residence, the existence of a criminal record, and income level, things that social media can help check, Roy says.

There’s little to stop fraudsters from creating fake social media profiles. On Fiverr, a marketplace where people can sell online services for $5, one user is offering to add 50 friends to any Facebook account in 24 hours. Startups such as Trulioo are helping companies detect phony data. The average social network user is tagged by others in photographs more than 70 times a year, and friends are almost always connected to one another, according to Trulioo founder and Chief Executive Officer Stephen Ufford. “All the richness about the things people do—that’s hard to re-create,” says Bill Ready, CEO of Braintree Payment Solutions. “If you have hundreds of friends on Facebook that have existed for many years, fraudsters would have had to start many years ago and collaborate with hundreds of people.”

Scouring the Web for personal information may heighten concerns that social media sites don’t do enough to protect users’ data. “I think consumers have consistently traded information for convenience,” Ready says. If banks “start using it to lend and extend credit, that’s where you start getting into privacy concerns.”

The bottom line: Companies are using social media to combat online payment fraud, which cost an estimated $3.5 billion last year.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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