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15 Years of Fighting and Fighting Fraud

Wow! On January 3 of this year, ID Insight celebrated its 15-year anniversary. Fifteen years ago, identity theft was not quite front-page news, the U.S. had not yet invaded Iraq and President Bush was just completing his second year in office.

I was in my mid-thirties and embarking on a journey that I could never have imagined. Through the first 13 years of my career, I followed the corporate route, progressing from a computer programmer to a data scientist (before we called it that) to running an information-based analytics business. While I enjoyed that period of my career, by 2002 I was ready for a change. I had always wanted to start my own business and the need to scratch that entrepreneurial itch was growing. I didn’t realize how badly I wanted to scratch that itch.
People told me I was crazy; in hindsight, I think they were right.

Over the next few weeks and months, an idea took shape: creating a fraud detection engine that could stop identity theft in its tracks. On January 3, 2003, ID Insight incorporated with a few bucks in the bank and an optimism that we were on to the right thing.

During the next two years, it was the proverbial “two guys in a garage,” building ID Insight by day and consulting by night, all the while trying to convince somebody, anybody to buy the solution we were selling. We had a blueprint for how to build the engine, but the engine was just that – a blueprint.

Those early days were both exciting and maddening – extreme optimism countered with a realization that I still had to pay the bills. I had never felt that vulnerable and exposed – yet never so excited and happy with my work life.

Whether it was divine intervention or just persistence, we finally got a prospective customer to say “yes” in late 2005. They bought our blueprint! While this was terribly exciting, they said it needed to be up and running in six weeks. We had no idea how to do that, nor did we have the money to do it. Thankfully, with help from our technology partners and sacrifices from all of us, we pulled it together and somehow brought our first satisfied customer aboard.

This created a new problem. Now that we had our first large customer, we needed capital to build a data center. Never having raised capital before, I remember asking people “how do you raise money.” The response I got was “just start calling everyone you know.” Over the next few weeks and months, we had raised enough capital to fund the data center expense as well as hire our first employees.

Things progressed, albeit slowly, until 2007 when the FACTA Red Flag mandate was finally published. The new FACTA regulations required financial institutions to screen address changes and new account address discrepancies for the likelihood of identity theft. That was it! This is what we had invented; this was our patent. Our special sauce. With this news that our solution would be mandated by November 1, 2008, the window was now wide open.

We needed to get the word on the street. ID Insight was the company that invented the technology to optimize the screening of address changes and address discrepancies. To do this, we would have to raise capital again. We went back to the well and raised a second round of capital. Per our plan, we quickly built the team to run for the finish line. The only problem was (hindsight 20/20) we only had 12 months to do it. So we began to sprint.

Over those next 12 months, we went from a handful of clients to over 300. While we were happy to add all of these clients, they were mostly smaller institutions that did not generate a lot of volume. I vividly remember November 1, 2008 – two things happened almost simultaneously around that date. First – all financial institutions had carved out their FACTA plans and on that day – our sales “flat-lined” as all financial institutions had made their plans. Second – there was this pesky thing called the “economic collapse.” I remember calling on prospective customers only to be told “Adam – we will be lucky to have the doors open at the bank over the next few months.”

By 2010, this “never say die” attitude and culture resulted in establishing our base. We had become a battle-tested group of fighters that believed they could withstand any storm and anything thrown their way. We had pulled every rabbit out of every hat. We had created new ideas that brought in revenue. And now, financial institutions were coming out of the economic collapse of 2007-2008. They were spending money again and realizing that our solutions were needed to stamp out identity theft.

Over the next seven years, we began to grow and expand our solutions and customer base. Suddenly, we were finding success in other markets such as e-commerce, health care and mortgages. Today, we are serving more than 2,500 customers and recognized as a leader in identity theft detections solutions – especially in the retail banking industry. We serve customers ranging from the top five banks in the country to one-branch credit unions in some of the smallest towns in America.

What I am most proud of is our employees, our shareholders and our board members. While we faced our share of adversity over the years, no one ever lost hope and never stopped believing. We never gave up. We all hung in there and kept on fighting. We are still innovating and still fighting!
I do believe in the adage that “what doesn’t kill you makes you stronger.” That persistence and the culture that has emerged continues to impress me. It makes me realize how fortunate we all are to have been a part of this great experiment.

As Ralph Waldo Emerson once famously said “it’s not about the destination – it’s about the journey.” And what a journey it’s been – here’s to the next 15 years!

Innovation Burns Bright for ID Insight at 50 on Fire

The energy of innovation crackled throughout the WeWork co-working space at Capella Tower last night as ID Insight joined 49 other Twin Cities companies being recognized for high growth in AmericanInno’s inaugural 50 on Fire awards.

50 on Fire recognizes companies, organizations and people having a banner year across a variety of categories, including technology, agriculture, civic engagement and more. ID Insight’s year included business growth, new product development, staff expansion and multiple awards and honors, including a Eureka! Award for Innovation from the Minneapolis/St. Paul Business Journal.

The Twin Cities is home to hundreds of hard-working startups and technology companies. Being recognized as one of the most innovative is a testament to ID Insight’s never-ending pursuit of new technology solutions to help banks prevent fraud. We’re proud of the recognition, but even more proud of our customers who challenge us every day to solve their most pressing problems.

Here’s to another year of incendiary innovation!

ID Insight Takes On Phone Fraud with New Solution

Anti-fraud technology leader ID Insight has made significant enhancements to its renowned fraud prevention platform to detect fraudulent account activity by screening phone number changes.

In the company’s research of tens of thousands of customer phone number changes in the financial services space, it detected interesting patterns that distinguish legitimate phone number changes from fraudulent changes. The analysis uncovered the following key indicators that signal an elevated risk of fraud:

  • Geographic distance. The greater the distance between the new phone number and the old phone number, the larger the risk. Likewise, there is an elevated risk for cases where the new area code is located a large distance from the customer’s current mailing address.
  • Carrier type. Changing from a landline to wireless, or wireless to landline often indicates higher risk than going from a wireless number to another wireless number. Certain types of carriers, such as prepaid phone numbers and voice-over-IP (VOIP) lines, are much riskier than landlines or postpaid mobile phones.
  • Urban versus rural. A change in phone number from a rural location to one that is tied to an urban center indicates a higher risk than a rural-to-rural or urban-to-urban change.
  • Area Code/Exchange. A basic validation check of the area code and exchange confirms that the phone number has been issued to a U.S. customer.
  • Local number portability allows customers to retain their phone numbers when changing service providers. New phone numbers that have been recently ported require a higher level of scrutiny.
  • Business phone numbers. A change from a residential phone number to business. For example, a new phone number that is tied to a check-cashing outlet is highly indicative of fraud.
  • Phone number verification. When the consumer name can be associated with the phone number through an independent verification source, the risk of fraud is greatly reduced.

ID Insight took the lessons learned from this research to develop a predictive model that combines individual risk indicators that help fraud investigators prioritize their queue and work the phone number changes that are most suspicious. By verifying the legitimacy of phone number changes, financial institutions are able to reduce the risks and constraints that may be holding them back from more fully utilizing the mobile channel.

Phone Change Fraud a Growing Problem

ID Insight, whose industry-leading anti-fraud solutions include address and identity verification tools for banks and credit unions, developed the new phone screen solution in response to the growing problem of fraudsters manipulating phone numbers as part of account takeover schemes. Criminals have recognized that when large money transfers are requested or other out-of-pattern account activity takes place, financial institutions are much more likely to place an outbound call or text to their customer to confirm the legitimacy of the requested account action.

Using an abundance of hacked personal data available on the black market, criminals pose as legitimate account holders and change the customer’s contact information, ensuring fraud alerts and other bank communications are sent unwittingly to the perpetrator and paving the way for complete control over their accounts before the victim knows it is happening.

“The mobile phone is a critical channel for bank customers and financial institutions that rely on mobile banking, on-line account opening and mobile wallet applications for convenience,” said Adam Elliott, founder and president of ID Insight. “Having controls in place to ensure the phone number in the customer profile actually belongs to the legitimate customer is critical for reducing fraud risk, which is why we added phone number screening to our portfolio of anti-fraud solutions.”

To learn more about its new phone change solution and the company’s full portfolio of anti-fraud technology for financial institutions, contact us to schedule a demonstration.

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