Online merchants to look to social network identity to eliminate fraud

12 Feb 2013

Very soon online merchants will be using shoppers’ Facebook or Twitter identities as a way to boost sales and reduce fraud.

There’s a famous New Yorker magazine cartoon from the 1990s which shows two canines staring into a computer screen and one of them quips to the other: “On the internet no one knows you’re a dog!”

That sentiment has held true through much of the history of the internet as we know it, and in the online world of 2013 the risk of fraud and cyber attack has never been greater.

Last year, Sony was rocked to its core when its PlayStation Network was hacked and hundreds of thousands of users’ login details were compromised.

In the past week, Twitter had to admit that more than 250,000 user accounts were compromised in a hacker attack while venerable newspaper organisations including The New York Times, The Wall Street Journal and The Washington Post have claimed to have been under sustained cyber attack from China.

And yet we are becoming increasingly dependent on the online economy to do everything from our online banking to booking flights, buying music and books, filing our taxes, renewing our car insurance and more.

Social identities

So identity matters. According to IT research and advisory company Gartner, online merchants will eventually come to rely on users’ Facebook, Twitter and other online identities as a last resort to ensure you are who you are and not a dog or a hacker.

Gartner predicts that by the end of 2015 some 50pc of new online retail customer identities will be based on their social network identities, up from 5pc today.

“For an increasing number of internet users, social networks are the internet,” said Ant Allan, research vice-president at Gartner. “Using ‘login with Facebook’ – or other popular social networks – reduces friction and therefore improves users’ experience of customer registration and subsequent login.”

For a country like Ireland, this will make a certain amount of sense when you consider that 48.7pc of the population – that’s 2.25m – are on Facebook, according to social media analytics agency Socialbakers. You may soon be confirming your next Ryanair flight via ‘login with Facebook.’

On-trend Trustev

One company in Cork has already spotted this upcoming trend. Entrepreneur Pat Phelan from Cubic Telecom is to head up a new start-up called Trustev.

The brainchild of chief technology officer Chris Kennedy, Trustev claims to be the first company of its kind to use social data as the primary data source when online businesses are making identity determinations.

The company, which has bootstrapped financially to date and is in the process of raising seed funding, is already trialing its technology with a number of Irish online retailers, as well as large players in the e-commerce and gaming spaces in the UK and Germany, which it says it cannot yet name.

The company’s chief marketing officer Donal Cahalane said a key reason for the company coming into being was the existing high fees associated with identity management, which would be out of reach of most ordinary retailers.

“The primary reason Trustev exists is the unbelievable complexity and expense involved in many products that would compete in the same general space,” he said. “It would be normal to hear of massive on-boarding fees in double/triple digits and then an ongoing fee of up to 5pc of the total revenue.

“We’ve cut out all the nonsense and created a simple to implement, effective product that’s easy to understand and easy to see the results of,” he said.

Cahalane believes the opportunity exists for Trustev to get involved in just about any transaction. According to research from retailer Kelkoo, some stg£50bn was spent online in the UK last year with the average person spending stg£1,500 each. Research by Amárach, commissioned by UPC, claims the internet will contribute €11.3bn to the Irish economy by 2016, up from €4.7bn in 2010.

Trustev employs six people full-time in its Cork office and expects to employ 20 people by the end of the summer.

“At present, we estimate around 1pc to 3pc of the total value transacted online is lost to preventable fraud,” said Cahalane. “Obviously we’re focused on fraud and payment technology at present, but in the future our social fingerprinting technology could be used to also combat online trolling and bullying.”

A version of this article first appeared in The Sunday Times on 10 February

Fraud image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years