A security vendor is trying to sell transaction monitoring services directly to consumers, a technology that until now has been offered primarily to banks.
Finsphere Corp.'s PinPoint service, which it began testing Monday, goes beyond the typical transaction monitoring system by incorporating location data gathered from consumers' mobile phones.
Observers have praised the Bellevue, Wash., company's technology but questioned whether its plan to targeting consumers is the best model.
Selling to consumers "is just a much better business model for us," Mike Buhrmann, Finsphere's chairman and chief executive, said in an interview.
"Part of our validation was working with the banks. Now we can provide it to the consumers," he said.
PinPoint uses data from mobile phone carriers to determine where a consumer's phone — and presumably the consumer — is at the time a transaction is initiated.
If a phone is detected in one city but its owner's card is being used somewhere else, that disparity could be a likely indicator of fraud.
Though Finsphere developed the system with banks in mind (it says some use it today in the United States and the United Kingdom), it expects that the sweet spot for the service is the consumer space.
Buhrmann said he expects PinPoint to appeal to the same people who have already shown a willingness to pay credit bureaus for ongoing monitoring of their credit reports.
Finsphere plans to test its system for three months and then launch it more broadly in October at a cost of $10 to $20 a month; Buhrmann said the exact cost will be decided during testing; and would likely include credit monitoring.
Finsphere's technology also works for card-not-present transactions such as e-commerce payments.
The Internet Protocol addresses that computers use to identify themselves online contain some location data, and this can be also used to determine if the consumer's cell phone is near the machine where an online transaction was initiated.
Finsphere gets the phones' location data directly from wireless carriers, and the financial data comes from consumers.
When consumers sign up, they are asked to provide their online banking credentials; Finsphere uses aggregation software from Yodlee Inc. to pull in data from bank websites.
Robert Boxberger, Finsphere's president, said that although his company is working to forge direct relationships with banks for this data, "with Yodlee we can reach many more banks and many more customers" much faster.
Yodlee's technology is more commonly used by banks and personal financial management websites like Mint.com. Before Mint's acquisition by Intuit Inc., Mint used Yodlee's technology to allow consumers to view data from multiple financial institutions on one screen.
Intuit began using its own technology for this purpose after it bought Mint.
Though Mint and its PFM rivals typically use this data to help consumers budget their expenses, some tools, such as alerts for large withdrawals, could also be used to spot fraud.
For example, when a major scam hit the news in early 2009, Mint sifted through its users' accounts to see if any of them included the bogus charges associated with the scam. It discovered that about 800 of its users had been affected by the fraud.
Using aggregation technology for this type of fraud screening is rare; by and large consumer-facing aggregation services are focused on budgeting.
Finsphere said it does not plan to add budgeting features to its service, though it is open to reselling its service through companies that provide those tools.
Analysts were doubtful that consumers would be willing to pay for this service.
George Tubin, a senior research director at TowerGroup Inc. of Needham, Mass., said that PinPoint "is great technology, it's a great concept and it absolutely makes sense … in a bank's arsenal."
But as a consumer product, he said, it has dimmer prospects. "Most consumers, I don't think, will have: No. 1, awareness, or No. 2, the drive to really go ahead and take on a product to help protect themselves," Tubin said.
"Most consumers know they have limited liability to transactions that are not legitimate" and therefore are less motivated to pay a third party to help them spot fraud.
Finsphere said it plans to target the same people who enroll in identity theft services, but Tubin said the company will have two major problems as it approaches that market.
Customers of credit monitoring services are "an audience that's very concerned with fraud — and now you're asking them, as a new company that nobody has really heard about, to provide their online banking user credentials," which those consumers might be reluctant to do, Tubin said.
The other issue is the pricing, Tubin said. PinPoint would be priced in the same range as credit monitoring services, but credit monitoring provides access to data that consumers cannot easily obtain for free on a monthly basis. Transaction data, by contrast, is freely available at anytime through online or mobile banking, he said, and consumers would be reluctant to pay much for a different way of accessing that data.
Avivah Litan, a vice president and distinguished analyst at the Stamford, Conn., market research company Gartner Inc., agreed that although Finsphere's technology "is very useful for fraud detection … I don't think it's going to fly with consumers."
Banks would be a more appropriate audience for Finsphere's service — but not necessarily a more willing audience, she said. "My educated guess is that the banks are nervous about privacy implications" of tracking their customers' location through their mobile phones, Litan said, though she predicts they will begin using this sort of technology eventually.