Unfortunately, online criminals don't find it very difficult to invent or steal financial records or social security numbers. But more than 20 years into the Internet era, it's actually really hard to fabricate a person with a track record of doing what real humans do online.
Socure cofounders CEO Sunil Madhu, (left) and Johnny Ayers, vice president of business development.
That simple concept is behind Socure, a fast-moving Manhattan startup that thinks it can unleash hundreds of millions of young, credit-averse or "unbanked" customers onto the financial services industry.
Founded by Sunil Madhu and Johnny Ayers, Socure validates a person's identity by analyzing their largely public track record of Internet usage. The subscription product, which includes a secure API and an analytics dashboard, gives corporate customers a 1-10 rating on the likely legitimacy of a user, a fraud score and an explanation behind their scoring.
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Financial firms are eager for cheaper ways to comply with anti-money laundering laws and "know your customer socially" rules, Madhu said in an interview. Also, social data can cut down on false positives — people who are wrongly flagged as fraudsters or bots. That's an increasingly common as Millennials and emerging markets play a bigger role in the world economy.
"Relying on online and social data is the next evolution," said Madhu, who founded the ad-tech company Hopskoch before Socure. Because the Internet is more than two decads old, and "there are hundreds of millions of web sites, mobile applications and social networks of all sorts that have penetrated the online populations of all countries."
After raising an $2.2 million seed round in March, Socure is getting new investors and buzz in the financial tech circles. Manhattan-based ff Venture Capital led a $2.5 million Series A investment round in Socure, a deal set to be announced Tuesday. Founder Collective and Two Sigma Ventures also participated.
To ff Venture partner John Frankel, Socure feels like the conceptual successor to one of his firm's recent big exits: Klout, the Twitter influence measurement tool acquired in March by Lithium Technologies.
"We came to the conclusion that there are four pillars around social: identity, influence, trust and reputation," Frankel said. "And if you're able to capture a couple of these, the other pieces sort of fall into line. One of the things we wanted Klout to do was build up the identity side, but they were doing so much of the trust and influence part, they just didn't get to it."
Socure is circumspect about exactly what data gets thrown into its analysis, but it starts with a social network log-in or a traditional form registration. Once the identity is pegged to a Facebook, Twitter, Google, LinkedIn account or form details, that identity can be validated using other online records, combined with the private data provided by the corporate client.
Half the world's 7.1 billion people are under the age of 30, and the credit system isn't nearly as well-developed in most other countries as it is in the United States, Madhu said. But those users do navigate the web, leaving evidence of their activities everywhere, lending strength to Socure's "Social Biometrics" product.
After meeting with Socure, Frankel wanted in. He now sits on the board.
Socure is focusing on validating customers in large financial services clients to start with, aiming for a narrower target than competitors such as Silicon Valley's Chekr and BlockScore or New York's demyst.data (All have raised funding rounds since Socure's seed round.) Its average annual contract is between $1 million and $2.5 million, Madhu said, but they won't disclose revenue figures or identify particular customers.
Like any technology that crunches public, personal data, the Socure concept sounds a little Big Brother-ish. But Frankel considers Socure one of the good guys. "It's nice to have these big data analysis that actually help consumers, as opposed to the ones being creepy in some way."
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Ben Fischer covers technology, digital startups and venture capital in New York City.