Re-posting from a recent article by Danielle Kucera at Bloomberg News:
Users of Facebook (FB), Pinterest, and Twitter share personal details every day. Now credit bureaus and payment companies Equifax (EFX), EBay’s (EBAY)PayPal, WePay, and Intuit (INTU) have begun trials to see whether social posts can help prove identities or detect whether customers are lying about their finances. “We are investing a lot in how can we use unstructured data that is sitting out there in social media that can help us understand a little more about identity,” says Rajib Roy, president of Equifax Identity and Fraud Solutions. Fraud cost U.S. online retailers $3.5 billion last year, according to payment processor CyberSource.
While the companies can access only public information or what people choose to share, a great deal is readily accessible. Many young people allow the public to see certain parts of their Facebook profiles, as well as accounts on Twitter and LinkedIn (LNKD). Consumers also leave traces of themselves on blog posts, Yelp (YELP) reviews, and online forums. Public data can include photo tags, locale check-ins, and a person’s network of friends. Facebook and LinkedIn provide software tools that let companies automatically import information from profiles on the social networks—with users’ permission—and consumers are allowing this more often, opting for the ease of signing into a website through Facebook, for instance, instead of filling out a separate form.
Intuit, the largest seller of personal-finance software and a provider of payment systems, has begun using LinkedIn to help verify the identities of users, whose profiles on the site list detailed employment history and often include endorsements and recommendations from colleagues. “There’s definitely enough meat on the bone there,” says Ken Miller, vice president of strategic risk services at Intuit.
Equifax is teaming up with government agencies, both state and federal, to help detect whether citizens who are receiving benefits are truly eligible. The bureau must verify identity, state of residence, the existence of a criminal record, and income level, things that social media can help check, Roy says.
There’s little to stop fraudsters from creating fake social media profiles. On Fiverr, a marketplace where people can sell online services for $5, one user is offering to add 50 friends to any Facebook account in 24 hours. Startups such as Trulioo are helping companies detect phony data. The average social network user is tagged by others in photographs more than 70 times a year, and friends are almost always connected to one another, according to Trulioo founder and Chief Executive Officer Stephen Ufford. “All the richness about the things people do—that’s hard to re-create,” says Bill Ready, CEO of Braintree Payment Solutions. “If you have hundreds of friends on Facebook that have existed for many years, fraudsters would have had to start many years ago and collaborate with hundreds of people.”
Scouring the Web for personal information may heighten concerns that social media sites don’t do enough to protect users’ data. “I think consumers have consistently traded information for convenience,” Ready says. If banks “start using it to lend and extend credit, that’s where you start getting into privacy concerns.”
The bottom line: Companies are using social media to combat online payment fraud, which cost an estimated $3.5 billion last year.
Kucera is a reporter for Bloomberg News.