More and more business is being done online. That much is obvious.
It is so easy and convenient to do business online and it gives you access to a far larger marketplace that knows no boundaries. The downside of this is that you are doing business in a virtual and impersonal world. The internet has a dark side where people work in anonymous ways operating under false identities.
It used to be that we would do business on a more local and personal level. We, or our circle of friends, would know the person we were dealing with. At the very least, we would get the chance to speak to the person, ask them questions and get a feel for who they were.
On the internet, businesses and individuals are having to make rapid decisions, often in large volumes, without any personal contact and with only some basic data to help them. These decisions are largely around credibility. Shall I do business with this person? Should I lend them money? How do I know they are who they say they are?
How do you scale, globalize and accelerate this decision making process in a way that expands your business without increasing your risks?
This problem is perhaps felt most acutely in credit card fraud. Around 2% of all ecommerce transactions made with credit cards are fraudulent – made by people claiming they are someone they are not. This is a huge and growing number of transactions in a market that will go through the $1tr mark next year. And contrary to popular belief, it costs the credit card companies nothing – the costs (that run beyond the value of the transaction) all fall back to the merchant.. As a result of this billions and billions of genuine sales are also being refused by merchants due to fear of fraud. It’s a big problem affecting the entire industry and one that is only going to get bigger as more people buy on-line from all over the world.
It reminds me a bit of my time at MessageLabs. We realized that anti-virus software had been designed in a pre-internet world and its reactive approach simply couldn’t cope with the new breed of viruses that used the power of the internet.
Similarly, credit cards were designed long before the internet – they are innately physical things and struggle to be effective when used online. You used to be in personal contact with the person you were receiving payment from. You could ask them questions and apply some basic common sense. But the growth of the internet and its inherent anonymity has changed all that.
However, if you are able to take advantage of all the huge amounts of data out there you can form a better opinion about whether this person is real and reliable than you could ever do on a personal level.
This is exactly what Trustev is doing. The company uses thousands of data points including social data (what the company calls ‘social fingerprinting’) together with the information received from the user to form an instant and highly accurate decision about that person’s identity. Is the phone registered in the same country as the person making the payment? Does their social network information correspond to where they are connecting from? Has this device or person been connected with any suspicious activity in the past?
Trustev is already gaining remarkable traction with the ecommerce industry because they have a truly effective solution for what is a very major problem. In every case customers are seeing an increase in the number of people cleared to do business while at the same greatly reducing the number of fraudulent transactions. It is this double benefit that makes it so compelling.
The company has a strong and innovative solution in a huge and growing market. In Pat Phelan, they also have an experienced, well-connected and smart CEO who is putting the team together to take full advantage of this opportunity.
So all in all we are very excited to be investing in Trustev and believe that are going to build a really big business and make the world of ecommerce a much safer and more successful place.