In an age of digital transformation, companies are ramping up allocation of funds in the pursuit of both personal and customer security throughout the pandemic. While the world may be almost out of the COVID-19 woods, fraud protection and prevention is establishing itself as a permanent resident within fintech transactions.
For perspective, Zelle, one of the major players in the mobile transaction of funds, posted 392 million payments in the first quarter of 2021. That’s millions of bank accounts being accessed and sensitive information being transferred in just a few months on one of the dozens of apps consumers are utilizing — and trusting — with their money.
According to Eric Haller, Experian‘s executive vice president and general manager of Identity, Fraud & DataLabs, financial technology was always in need of fraud protection, but the pandemic created a surge companies are now working to catch up with.
Haller, who boasts a long career history being a technologist and innovator, spoke with FinLedger about identity verification, fraud detection and how he balances safety with convenience. Because as it turns out, users don’t just want to know that their information is bring protected, they want to know it’s easy.
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Why is identity verification and fraud detection important in general?
Haller: From a business perspective, companies want to provide the best customer experience they can to the people that come and work with them, particularly in a digital environment. At the same time, because they’re not seeing whoever they’re working with, they are taking a bit of risk.
In the process, everything’s provisioned to them in this environment where they’re really not sure. They may not even be sure they’re dealing with a real person; it could be a bot. They have a lot of risk in the process of fraud protection. They want to provide this great service, but they also want to protect themselves, so that they don’t lose so much money if they go out of business.
It’s a company’s job — and its success — to protect both its users and itself from security breaches, data leaks, etc. That’s a lot on the line for a company.
On the consumer side, it’s a similar story, but a different side to the same coin. The consumer wants the best customer experience they can have. They don’t want to be bombarded with lots of questions or go through lots of hoops.
How do you balance safety and convenience with security?
Haller: It’s about optimization. And I love the word optimization, because being a guy that spends a lot of time in machine learning, it’s pretty much what machine learning is all about. It’s about mathematically optimizing.
But when it comes to safety and convenience, it goes back to our roots — doing a lot of analysis, a lot of modeling and knowing with precision, exactly when we think something’s fraudulent, how many times it actually turns out to be fraudulent.
It’s like when you’re playing blackjack, and you know that certain hands carry certain probabilities of winning one hand versus another. You can compute which hand is likely to win, and which cards are likely to contribute to a winning hand. It’s the same thing with fraud models. When you’re collecting a lot of information, or modeling for it, we can, with precision, determine when we want to slow down the process, and how many times there’s a good person in there.
Then it’s a matter of dialing that process up or down, which is really a business decision. How much risk do they want to try to manage out of their process versus how much they are willing to accept in the name of making sure those good customers aren’t inconvenienced.
Earlier, you said that because of the pandemic, business has been up. How are you keeping up with this demand? And what are the challenges with that?
Haller: Experian is a very large organization. We have about 18,000 employees and we do about $5.4 billion in revenue. As fraud protection demand increases in our businesses, we’re able to respond pretty effectively.
We’ve had some big things happen and it’s all hands on deck. As it relates to the people management side, it’s making sure people don’t burn out. We run into what we’ll call ‘hyper cycles,’ where people have to work longer hours. So making sure that we can be flexible in giving people the time off that they need, when they need it.
Recognizing people for their hard work and making sure that they want to do this. When you are really overwhelmed with a lot of work, the important thing is making sure people feel they’re appreciated and rewarded.
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Experian itself is one of the three largest consumer credit reporting agencies in the United States that has staked quite a bit of claim in the fraud protection, guidance and prevention landscape. But it’s not the only player in the space. Fraud protection startups are both popping up and dominating amid the boom for financial digitization.
E-commerce fraud prevention company Forter nabbed $300 million in a Series F funding round led by Tiger Global Management, nearly tripling its valuation to $3 billion in May. That same week Sift, a digital trust, safety and fraud protection company, announced Tuesday it had entered an agreement to acquire Chargeback, a Salt Lake City-based fintech which offers payment security services.