Identity theft and associated fraud is costly to financial organizations as well as consumers. Market-research firm Financial Insights says such theft will cost financial institutions $4.2 billion this year and likely reach $8 billion by 2006. Startup ID Analytics Inc. says it has found a way to thwart thieves at their point of entry: the credit application.
ID Analytics has studied more than 200 million credit applications from credit-card issuers, banks, and other sources, 10 million of which are suspected or known to be fraudulent. Using that data, the company has developed pattern-recognition technology that looks for dozens of fraudulent patterns in an application. "We can see trends no company would be able to see looking [only] at their own data," says CEO Bruce Hansen. A bank approving a checking account may not know that a thief used the same Social Security number to start three retail charge cards and establish a new residence just prior to applying for the account.
Applications from customers such as Citibank and Diners' Club get vetted against the vendor's database and given a score that ranks the likelihood that it's fraudulent. "I can say it works," says an executive at a large financial-services company, "and it's working better than our initial expectations."
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