Heather Sugg: Hi, I’m Heather Sugg reporting from Money 2020 USA. Today, I am happy to share that we have Johnny Ayers with us from Socure. We are going to be talking about the ever present topic of fraud, and specifically, first-party fraud. So, Johnny, you and Socure have been known for third-party fraud and synthetic identity fraud, and you have launched a new product for first-party fraud.
Tell us a little more about it.
Johnny Ayers: Yeah, thank you. So, today we launch our Sigma Identity Fraud solution, specifically targeting first-party fraud. This challenge is something that’s pervasive across all digital banks, financial services, merchants, where folks are, unfortunately, repeat abusing account by account by account to a tune of almost 100 billion in losses.
And so we have developed a consortium that is pulling together many of the largest players with about 45 percent overlap between accounts to contribute their known bad, their repeat abuser, their closed account data, which is going to enable us to stop first-party fraud at scale and basically take all the amazing analytics, the amazing data science talent that we have in solving KYC and solving identity fraud and synthetic identity fraud and apply it to this new, very rapidly
growing type of first-party fraud.
Heather Sugg: One of the things we all know about fraud is that it takes a village. And I understand that what you’re doing is building a consortium for this first-party approach. Can you tell us how you’re doing that and how it will look?
Johnny Ayers: Definitely, so the consortium approach is something we’ve really taken to how we develop most of our products.
Our identity fraud, our synthetic identity fraud, we have the largest database of known good and known bad identities. So a tune of a couple billion, billion outcomes.
When we think about first-party fraud this is really about kind of behavioral signals and repeat behaviors of consumers that are moving institution to institution with their own identities, with an intent to defraud that institution.
We’ve seen that, whether it’s in a depository account or a line about money account coming out an ATM or even folks that have no intent to ever repay in a buy now pay later transaction. The ability to look at how these consumers are behaving at scale, how these consumers are abusing and attacking a lot of consumer regulations is enabling us a level of visibility to stop these BNPL Fraud attackers.
You know, maybe they hit one or two institutions, but they’re not going to be able to hit 10. And so the scale of the network that we’re launching with and certainly the partners that we have, we’re really, really, really excited about attacking this problem that unfortunately has such negative ramifications on good consumers because so many protections and blockers are having to be put in front of them to stop, you know, these unfortunate repeat abusers.
So we’re really excited about the Socure consortium and our ability to pull together these really amazing partners and really kind of launch this and something we believe is going to get really massive scale and put a big dent in this hundred billion dollar first-party fraud problem.
Heather Sugg: Can you share more about some of the partners that are involved or who you’d like to get involved?
Johnny Ayers: Absolutely. So one of the things that’s so clear that we’ve had the luxury and benefit from building is, you know, we have pretty much every major consumer fintech, almost every major bank to the tune of about 2, 000 customers across really every consumer based protocol.
And specifically for this launch, we’ve initially focused on a number of the largest digital bank and financial institutions. Partners like Green Dot, SoFi, Public, Ingo Money and a number of other tier 1 partners of ours to enable us to look at the overlap across these customers. We see 45 percent overlap across these different providers, and we do see, unfortunately, you know, individuals hopping institution to institution to institution kind of committing fraud one after another, after another.
And so we’re very, very fortunate to get to co innovate to co invest and co build with a number of these amazing partners of ours and already have lined up and have folks contributing, including the largest buy now pay later providers, the largest investment manager platforms and so we believe we’re really just getting started here with this launch.
Heather Sugg: Very nice. Now one of the areas I’m excited to dive into with you is the research you’ve done for first-party fraud. Why don’t you tell us about that?
Johnny Ayers: Definitely so as a part of the consortium launch, we also launched our, what we believe to be the largest first-party fraud survey results and analysis on first party fraud and how Americans and kind of your everyday consumer thinks about these types of attacks.
What we’ve seen is pretty staggering in that, you know, two thirds of all U. S. Citizens believe that there shouldn’t be legal consequences to this type of behavior. We are seeing a very large distribution of Gen Z that have taken out binary pay later loans with no intent to pay. We’ve seen a very large number of consumers, you know, in the 20, 30 percent where their friend has committed BNPL fraud and so there’s been a number of really eye opening statistics for us, I think around, you know, particularly some of the younger demographics and how comfortable they are in feeling that, you know, potentially they’re sticking it to the man, that there’s not actually a victim on the other side. And so whether it’s in, you know, lying about money coming out of an ATM, whether it’s in chargeback fraud, whether it’s saying, hey, I didn’t place that bet or make that investment.
It seems that the survey results would tell us that they don’t believe that this is actually a crime when in fact, of course, they’re stealing money from institution after institution after institution. And so I really recommend everyone look at the results we have available on our website and are really, really one, very excited about the launch of the consortium and then two, I think people will be really educated and have their eyes wide open from how the everyday consumer thinks about first-party fraud, at least here in the U. S.
Heather Sugg: It’s shocking. And the fact that they’re reporting that on the surveys really shows how bold that has become and fraudsters in general have become bolder over the last several years too.
Johnny Ayers: Definitely. I mean, we’re seeing everyone from again, betting websites, investment managers, the two sided marketplaces, you know, you’re seeing folks getting, you know, very comfortable with communicating that money didn’t come out of an ATM that they didn’t make that transaction that they didn’t make that bet. And so I think that our ability to work as a network, as a community to be a part of the solution to really look at who are these repeat abusers and work together to assume the responsibility to stop this type of kind of leakage from the financial services and broader e-commerce ecosystem.
And so, yeah, again, we’re really, really excited about this launch and we view this as a really, really, really important solution to a rapidly growing problem.
Heather Sugg: Absolutely. Well, with that said, what advice do you give to financial institutions that do need to combat this first-party fraud?
Johnny Ayers: The biggest one is, ‘hey, like, let’s work together to solve this.’ Fraud is a massive network ecosystem challenge, everyone’s facing it. You know, we were, we were talking to some folks here at dinner last night and many of them said, ‘Hey, let’s win on our credit models, but let’s work together on fraud.’ And so this is a large network data sharing where I think we have to come together and again, I think there’ll be many solutions that work to solve different pockets of the ecosystem.
We believe that Socure can be a major, major, major player and a major force in this, given the momentum we already have in the market, given the partners and customers that we get to work with. And so, yeah, my ask to the audience and certainly banks and credit unions and fintechs would be, you know, please reach out to Socure and let’s build a solution together, would welcome the opportunity to do it.
Heather Sugg: There you have it. Well, Johnny, every time I see you, every new year, you’ve got something big coming out. What’s your wishlist for 2024?
Johnny Ayers: Look, you know, we have an amazing, amazing team at Socure. We rapidly, rapidly, rapidly innovate and certainly fraud is a never ceasing ghost that we are chasing. And, you know, I think, I think the biggest thing for, for us is. pushing the envelope around the usage of AI. You know, we were really kind of, I think, early in machine learning and AI and its application to identity and fraud. And so really, really pushing the envelope around how we, how we think about stopping, you know, scripted bot attacks, how we think about stopping generative images.
How do we think about Stopping deepfake injections, at a very, very large and repeatable scale. Candidly, not just in financial services, but as we really have expanded quickly in gaming. We’re now deployed in pretty much all of the major states and a number of federal agencies. And so this, this kind of ability to utilize really bleeding edge AI, whether it be in large language models or transformer models or lots of other kind of new foundational AI models.
Pushing the envelope around what is possible in identity verification and fraud prevention is probably the thing I’m most excited about. And certainly folks will hear more and more about where and how. Socure is really leading, I think, the pack in our ability to using cutting edge AI and cutting edge analytics to solve, you know, some of these really systemic and endemic fraud problems and, yeah, I look forward to talking further about our successes in the year.
Heather Sugg: I like it. Well, there you have it. It’s been nice talking with you.
Thanks for joining us. Thank you so much.