On Fintech today we are please to speak to Adam Elliott, Co-founder, President, CEO of ID Insight. The Company primary offer account takeover fraud and new account fraud solutions to the financial services community.
Who are you and what’s your background?
I am Adam Elliott, president and co-founder of ID Insight, which provides platform-based solutions to help financial institutions, credit issuers, online retailers and healthcare companies fight identity fraud. After graduating from St. Olaf College in Minnesota with a math degree and a computer science minor, I went on to get my masters degree in statistics at Penn State. I then became a programmer for a while before I made my way over to Fingerhut which was the second largest catalog company in the country at the time. That’s where I started catching the analytics bug, before we were even calling it analytics. After a brief stint working for Time Warner, I eventually wound up at Deluxe where I headed up its Analytics Group which led me to ChexSystems which was a subsidiary of Deluxe. While at ChexSystems I led the team that built out its Debit Bureau, which is really what led me to the fintech side of things, building out risk and fraud for all of the banks in the country. And of course ID Insight was the next step in my journey.
What is your job title and what are your general responsibilities?
As President of ID Insight I’m involved in a little bit of everything. I’m very hands on in the sales process, developing strategic partnerships and working with our product and technology teams. And after all these years, I still immerse myself in the data science side of things working with our data science team on all the new machine learning and AI technologies that have evolved over the years.
Can you give us an overview of your business?
Primarily we offer account takeover fraud and new account fraud solutions to the financial services community. We’re unique in that we don’t just provide data and analytics, we also license our case management software that institutions use to configure the solution and manage fraud investigations. A major change for us over the last few years is that we’ve gone all in on digital data assets as the financial world is moving digitally in terms of new account opening and account management.
We’ve also evolved as fraud schemes have evolved – our solutions have evolved to stop the new fraud schemes that bubble up. And we’re bringing in data from different sources and orchestrating it together in a predictive manner to help our customers avoid any new fraud schemes.
Tell us how you are funded.
We’re bootstrapped. We did take on some early individual investments and have been self-funded since 2008. As we create net income, our model is to invest that back into the company on the technology side.
Why did you start the company? To solve what problems?
I started ID Insight to solve the major issue of identity fraud. We realized a long time ago, before ID Insight, that identity fraud was really going to be a major issue. At that time, identity fraud occurred in one of two ways – the fraudster would open an account in someone’s name, or take over an account that the victim had already established.
We realized that a change of address event was present in both types of fraud. Someone would fill out an application with my credentials but would list an alternate address where they would receive the cards, the statements, etc. With account takeover, the fraudster would call my financial institution to change the address and then request that a replacement card be sent to that address.
And we realized that by looking at all the data around these address changes and applying analaytics to the data, you could identify the high risk address changes. For example, why is Adam suddenly moving from a nice suburban home in the Twin Cities 1,800 miles away to a vacant property in the highest white-collar crime area in Miami? The other issue that has continued to gain traction is to reduce friction. Anywhere that you can automate manual process and reduce friction for the customer is critical. Techology has allowed this and banks and credit unions understand it is a competitive issue. When we build things we ask ourselves, “how does this reduce friction for the customer?”
Who are your target customers? What’s your revenue model?
Our primary target customers up until this point have been financial services companies of all sizes. Depending on the size of the institution and their relationship with our resellers partners will determine how we target them. And our services apply to other industries, right now we’re making headway in e-commerce, and they also apply to insurance, healthcare, and many others.
Our revenue model is value-based pricing, our customers need to show a return on investment. They pay us per transaction through a click-based/click fee transaction model, and we provide the value to stop the fraud. Our clients also pay us a licensing fee for our case management software.
If you had a magic wand, what one thing would you change in the banking and/or FinTech sector?
I would like to see the establishment of a nationwide fraud consortium network that cuts across vertical markets. Think of it like the credit bureau, only instead of financial services contributing credit-related information they are contributing their fraud experiences. We have created our own network with our own customers and they love it. For example, when Bank A tells us there was fraud associated with the phone number, if that same phone shows up at Bank B, they know it and stop it. What if not just our customers but all financial services companies contributed and used a network like that?
What is your message for the larger players in the Finance industry?
Overall, your fraud rate is likely pretty low, but there are many things that aren’t accounted for in your P&L statement that are fraud-related that don’t get reflected in that line item. There’s something to be said for customer trust – customers are the real victims. A large player might not think about their fraud number, but it becomes a total brand issue. If a customer gets their account taken over, they’re not going to be happy, and as a financial institution or ecommerce retailer, you’ve got to do the right thing.
You’ve got to balance managing the P&L, protecting your brand, keeping the fraud losses in check. You also don’t want to create a burdensome experience for your legitimate customers. You need to care, beyond fraud avoidance, about the total customer experience, and making that a safe and frictionless experience.
What phone are you carrying and why? And what are your go-to ‘fintech’ mobile apps?
I’m using the iPhone 13, and my banking app for at least one of my credit cards. There are no physical branches associated with my bank, so the ability to deposit checks, move money and do everything remotely is critical. I also think you need to be very selective about which apps you use because of identity theft – the bank I use is on the forefront of protection. I don’t use certain peer-to-peer (P2P) apps because they are fraught with security gaps.
Where do you get your industry news from?
Can you list 3 people you rate from the FinTech sector that we should be following on Twitter?
I like to follow @briankrebs to find out what he’s suggesting to do around data breaches and security. I also follow @spirosmargaris who is big on the FinTech front and delves into AI and blockchain technologies. And I follow @MinneAnalytics to keep up with what the local analytics and data science community in Minnesota is talking about.
What’s the best FinTech product or service you’ve seen recently?
I admire the Notifi platform from Fiserv because of how they’ve enabled digital and mobile customer communication. Notifi enables community bank’s to choose what they want to be alerted about, how they receive those alerts. Fiserv has created a solution that was once only available to big banks but they can deliver at a cost that even the smallest banks can afford.
Finally, let’s talk predictions. What trends do you think are going to define the next few years in the FinTech sector?
First up is the global aspect – because banks are becoming more international as the world’s getting smaller, banks are gaining international footprints, which is leading to a global data network, which in turn is leading to new international fraud.
Second is Bitcoin. The same fraud and anti-money laundering (AML) practices that have surround our traditional currency in financial services will be expanded to cover Bitcoin.
Lastly, the digitized identity will emerge, combining all physical and digital identity elements. Data breaches have rendered trust in identity credentials to almost zero. What will emerge will be a trusted identity network (or networks) based on experience.