Secure Identity Systems LLC is offering banks a system designed to verify card transactions by determining the location of cardholders' mobile phones and whether they are physically close to the point of sale.
The system, developed by mConfirm Ltd. of Tel Aviv, uses mobile phone location data and other information about customers' purchasing behavior to create a risk score for transactions.
Secure Identity, a unit of FNB Merchants LLC of Brentwood, Tenn., is expected to announce an exclusive U.S. licensing agreement for the system today and is already pitching it to banks. Bryan Ansley, Secure Identity's chief executive, said he expects some issuers to begin testing the system next quarter and expects full rollouts in the fourth quarter.
Customers must agree to let banks keep tabs on where their phones are, and Mr. Ansley said the technology would complement existing fraud detection systems.
"There's a lot of risk that's being borne by even the smallest banks that this technology can help mitigate," he said in an interview Tuesday. "There are expenses to false alerts. This technology is going to help customers" get "a superior return on investment on other systems in place."
Laurence Neumann, mConfirm's CEO, said the technology has been tested with the Israeli issuer Visa Cal (mConfirm's chairman, Zvi Meshi, was once Visa Cal's CEO). In that test, Visa Cal compared its risk data to information generated by Fair Isaac Corp.'s Falcon Fraud Manager risk scoring tool; Mr. Neumann said his software was able to verify the identity of users in 90% of the cases where Falcon generated a false-positive result, he said. He also noted that the Falcon tool can be calibrated differently by each user, which will affect the false-positive rates.
(A call to Fair Isaac was not returned by press time.)
MConfirm's technology evaluated location data provided by wireless carriers called Cell ID, which Mr. Neumann said is easily available. The carriers "get money for every location request."
Right now the mConfirm system works only with point of sale transactions, but Mr. Neumann said his company is working on a way to expand into online purchases. In six months it plans to launch a system that will be able to compare the location data in a computer's Internet Protocol address against the customer's Cell ID data to determine whether the customer is sitting at the computer where the transaction was initiated.
Mr. Neumann said he doubts consumers will have privacy concerns, because they already divulge their location when they make purchases. "There is no invasion of privacy here," he said. "We are not using any bit of information that the credit card company does not already have. … We are not following you. This isn't Big Brother."
Avivah Litan, a vice president and research director at Gartner Inc., a market research company in Stamford, Conn., said the mConfirm technology is based on proven principles of authentication. "I think it's fantastic technology," she said, "because it's a second factor and it's out of band. It's all the things we preach about."
Getting consumers to opt in would not be difficult, Ms. Litan said. Card companies would need "some kind of incentive that would outweigh the privacy concerns … but the credit card companies are never short on incentive programs."
She said it might not be easy to get banks to use the technology, in part because they may be reluctant to use data that is generated outside the card system and is outside the banks' control. "Right now there's a lot of different technologies that banks can use to lessen fraud and lower false positives, and they're just not rushing out to adopt it," she said.
