ID Insight

Top 10 Moments of 2011

2011-12-23T11:16:00.002-06:00

As we are gearing up for the holiday season, I have found myself reflecting on 2011. It was a fantastic year for ID Insight and we can't wait for 2012. While there were many great memories on the business front, there were as many or more on the life front. Here is my top 10 list for 2011.

- Continued growth. ID Insight continued to see significant growth for the third year in a row. We concluded our 9th year in business by adding many new clients, retaining our existing clients and creating new products and enhancements. Giddy about what we can and will do next year.
- Time at the Lake. I feel blessed to have been able to spend some serious quality time at the lake this summer with my family, parents, in-laws and friends. Lots of boating, swimming, camp fires and fishing. Looking to resume when the snow melts... probably in May.
- Partnerships. We are fortunate to have established great partnerships with FIS, Fiserv, First Data and others. We enjoyed continuing to develop and grow these relationships. In 2011, we also fostered new partnerships with Centris, Zoot and others. While our business drives these partnerships, I am most thankful for the people and personal relationships that have been developed.
- Football. While football has always been a part of the Elliott family, it took a turn this year when my 9 year old daughter Abby decided she wanted to play tackle football with the boys. Things were interesting at times, but by year end she was having a blast and is now preparing for next year's season.
- Twin Cities. After spending 3 years driving 120 miles round trip, we were all extremely excited to move our corporate office back up to the Twin Cities. Our employees have become much more efficient and able to spend more time with family and friends. Fantastic.
- Coaching U8 Girls Hockey. I decided to become head coach of Abby's U8 Girls hockey team this year. It has been an absolute 'gas'. Smiles everywhere and they actually listen. One of the most rewarding experiences I have ever had.
- Broadband Scout. A break-out year, where we added many of the top broadband issuers in the country, Federal, state and local government and various other groups. We topped our 500 millionth transaction as well.
- Travel. Kelly loves to travel and we were fortunate to get a few trips in this year. We got out of the snow to see family in Arizona in March. We also enjoyed a few days in the Florida Keys in April with friends and were back at Disney World in the fall. All great memories and able to warm our Minnesota bones.
- Our employees. We added to our team this year, accomplished a ton and had fun doing it. We were excited to bring on Sudheer as our senior engineer, Lee as a Data Analyst and somehow coerced my beautiful wife Kelly to join as our Office Manager. Our company is our employees and I couldn't be more proud.
- Duck Hunting. After a couple years away from the duck blind, I was dragged back this year by young Abby who begged long enough for her first duck hunt that Dad capitulated. We hunted for an hour and nearly got our limit of mallards. She now think duck hunting is going out for an hour in nice weather and getting your dinner. I resisted the urge to take her back out a week later when the temperature dropped to single digit.. maybe next year.

Anyway, I am thankful for 2011 and greatly looking forward to 2012. Here is wishing you a great work / life balance, a fantastic holiday season and a prosperous 2012!

Where is all of this Analytics Stuff Going?

2011-09-22T16:17:00.003-05:00

Over the past few months I am increasingly intrigued by what has been going on in the field of analytics. Over the past couple of decades, the word "analytics" has been fashionable. Whether it was text-mining, web analytics, CRM, neural networks, etc. the word analytics has become a standard word in our business language and required for nearly any job qualification these days.

While analytics has been fashionable for awhile, there are certain driving forces lining up that I believe are going to drive analytics to levels never seen before. This explosion can be attributed to the sheer explosion in data volumes available for analysis and the vast storage and instantaneous retrieval to make more informed decisions much faster. This trend is only going to continue.

We are already seeing this beginning to accelerate with the crazy amount of acquisitions going on over the past couple of years. IBM alone has acquired Netezza ($1.7B), Unica ($.5B), SPSS ($1.2B), and most recently i2 and Algorithmics ($.4B). And it doesn't end with IBM: HP came out in August and said it was going to be exiting the PC and tablet market, and then bought Autonomy for $10B to focus on .... you guessed it: Analytics. These are not sporadic, small plays. They are massive, industry changing moves.

And it doesn't matter what industry you look to. Counter-Terrorism, banking, advertising, health care. Everywhere we look, the data is exploding exponentially creating the biggest sandbox of questions and answers ever seen. For example, companies are now developing analytic technology to know where I use my android smart phone and when. Imagine you are walking out of your office at noon for lunch when an advertisement comes across your phone with a 20% coupon for the restaurant across the street. Talk about relevant.

Speaking of smart phones, the long promised notion of mobile payments is quickly taking shape. The technology pieces are finally aligning and we are seeing some major moves from the big payment providers (Visa, Mastercard, Amex, Google) in this direction. The crusty old bank payment channels are being attacked on all fronts. What has me completely mystified is what will happen when this analytics explosion collides with the explosion in mobile.

I am going to grab my box of popcorn, and and get a good seat for this show.

Where is My Broadband Connection?

2011-08-01T16:31:00.003-05:00

Over the past few months and quarters the notion of where my broadband connection resides has shifted...... at least for me. A few short months ago, I would have told you that my broadband provider was Comcast, as that was who provided internet access to my home.

A few short months later, I am not so sure. A few months ago, I bought one of those funky new Android smart phones on Sprint's 4G network. I am now seeing download speeds of 3-6 mbps that exceeded my basic Comcast cable connection that was coming in around 3 mbps.

What is more interesting to me is the Android comes with me wherever I go. Whether I am at the lake, work, the store or the coffee shop - my internet is there with me. On occasion, my wife will ask me to turn on the "hot spot" so she can connect in with her iPad.

To see what was going on with wireless internet versus traditional broadband, we turned to Broadband Scout and looked at what was going on in the Twin Cities 7 country metro. Specifically, we looked at all of the major providers and analyzed the trends or changes that have occurred over the past few quarters. What we found was that internet transactions through a wireless device increased by a factor of over 200%, whereas Cable and DSL diminished by a few percentage points.

These trends and others can be seen below on our interactive map. Feel free to select various types of broadband providers or the providers themselves to see what is going on in the Twin Cities area.

Positioning Product With a Sledge Hammer

2010-11-10T15:53:00.005-06:00

I continue to be amazed at how sensitive the sales engine can be to your product positioning. After all - the product is the same functionality with the same general need, price and value. However - over the past few years our product positioning has changed fairly drastically. Much of this change in positioning has been due to market conditions and market needs. What I have learned is that you need to be constantly aware of your product positioning and how market conditions can impact that positioning.

In 2003, we created Safe2Change to be the preeminent solution to screen address changes for the possibility of identity theft. In positioning the product, our key messages focused on "taking a bite out of crime" and "stop the fraud losses". While that all sounded good, it didn't really end up with us taking the world by storm. At that time, identity theft was quickly becoming a national story. Identity Theft was hot - and we felt our positioning was well suited for those market conditions.

Unfortunately - while the topic was "hot", our customers weren't buying into it. Why? Because, even though it was a hot topic, our typical client was not being impacted by the rise in identity theft in a meaningful way.

Flash forward a few years to 2008 and the marketplace changed again. Identity theft was still relatively hot, but in late 2007, the FTC came forward and mandated that by November of 2008 that all financials institutions needed to screen address changes to meet the new FACT Act compliance standards. Suddenly, we changed our positioning from "stop the fraud" to "Safe2Change is the most cost-effective way to meet compliance".

It was a good move and allowed to us to bring up over 500 banks prior to the compliance deadline. However, I don't think it was necessarily our product positioning that drove that response. The reason most bought was purely out of fear. They had to do something and Safe2Change was available.

While we did bring up more than 500 institutions, that only meant that about 20,000 chose something else, and for the lion's share - these institutions chose to send first class letters to consumers who changed their address as their compliance solution.

Once this was adopted in late 2008, the last thing the banks were thinking about in 2009 was changing to something else. In 2009, I think we were most interested in trying to find a cave to hibernate in. Banks were not interested in changing solutions and didn't have the resources to change anyway.

As we entered 2010, suddenly we saw logic and rationality return to our clients and prospects. Further, our clients began to realize how painful their letter mailing compliant solution really was. As we got deeper into things, we also realized how ineffective that a letter mailing strategy is. In short - it is expensive, inefficient and a bigger problem than people first realized.

As such - we once gain found ourselves evaluating the positioning. We had gone from "stop fraud" to "best compliant solution". While those strategies may have made sense for the market dynamics at the time, it was no longer top of mind. Suddenly - it was all about cost and expense.

We quickly shifted gears and focused on cost as our main positioning. Why? Well, as someone once put it "It's the economy stupid". We realized that while banks were spending needless dollars on expensive manual processes, it was not until recently that this number began to become meaningful. Suddenly saving half of postage fees for a year means I don't have to cut 3 more headcount.

This new positioning is now paying dividends. Since adopting this, it has become our sledge hammer. Are you interesting in saving millions of dollar sounds pretty good. This positioning in 2003 or 2008 did not have any meaning. Now it does. It is generally the same product, the same general needs with the same pricing - but the positioning has changed to meet the changing market need.

Kleenex would have been a lot easier.

A.E>>>

The Need for Speed

2010-10-05T11:34:00.002-05:00

The ability to go "faster" is part of the culture of the United States. Whether it was moving from the horse and buggy to the automobile, the prop plane to the jet engine or moving from dial-up internet service to broadband, we are always looking to do things faster.

And every time we make a monumental leap in speed, economic prosperity springs eternal. While the tangible benefits are many times obvious, it is the intangible benefits that are more interesting to me. For example, when we moved from horse and buggy to the car, people were hired to make the cars. Likewise, steel became much more important which led to economic booms in towns like northern Minnesota and the steel belt. However - it was the intangibles that became interesting. This economic boon created tons of new jobs, which in turn led to the creation of many other innovations and industries such as the airline industry. It also created the need for highways and byways, reductions in cost and increases in trade.

We saw a similar phenomenon during the dot com era. Heading into that period, it was as if we didn't have any idea what would be the end result. Amazon, online bill pay, PayPal, Google, etc... How could one predict all of what would happen by allowing people to connect to one another. This was pushed one step further when we moved from dial-up to broadband.

Flash forward a few years and here we are again. For the past decade, we, as consumers, have been rather content with our internet and current broadband speeds. The lay consumer will tell you that their broadband speed is "OK" and when you ask them what speed they are getting, the normal answer is "I don't know".

Today in the U.S., the average consumer with cable broadband is getting roughly 5 megabits per second of download speed and 2-3 mgbs of upload speed. This metric describes how much data you can download or upload over that connection. DSL, wireless and satellite connections are less than cable on average.

We are now at the forefront of what appears to be a broadband war. The broadband stimulus program is in full swing with billions of dollars having already been awarder to bring high speed broadband to the nation. Where this is all heading is not yet known, but the theme is the need for speed. Today the U.S. ranks in the 20's as a nation on the broadband speeds given to consumers. Meanwhile, there are countries such as Singapore where the entire country is getting speeds of 1 gigabit. That's right - speeds about 200 times what we receive today on average.

As we begin to move up the speed ladder, the most immediate benefits are fairly clear. We can get information faster. We can do things like watch TV (think advertisement) on our mobile devices. We can transfer very large online medical records in a flash.

However - it is those intangible benefits that are most intriguing. What other value chain items will be positively impacted?. What new technologies and innovations are going to be created? What new payment methods and trade will this enable? How will this re-vitalize rural areas that have not been able to participate in the global marketplace?

Will this next jump in speed lead to the economic springboard that we have seen in the past? If we truly do substantially improve our broadband infrastructure and speed, my answer is going to be YES. The other important question is whether the U.S. will move up the ladder or let about 22 other countries that are ahead of us reap the benefits.

From Pipes to Platforms

2010-06-04T11:03:00.003-05:00

As we look at fraud detection systems for financial services, it gets very interesting when we consider what has emerged. Here is a snapshot of what we typically see:

New fraud trends routinely pop up. (Think phishing, bust-out, takeover, new account, etc..)
When the problem becomes big enough, the institution seeks out a solution to identify this fraud. This is typically a point solution that solves for that specific problem.
As new types of fraud emerge, the next point solution is deployed.
Many of these solutions are dependent on data and analytics.
Over time, we begin to see a maze of overlap with respect to data and functionality.
Suddenly, we find ourselves with a highly complex system.
In addition, our cost to administer and manage the growing list of vendors increases.

So how do we end the madness? How do we meet the business needs most optimally?

How do stop the fraud, anticipate the next fraud type and not significantly increase the costs of creating such a complex system?

I think the answer lies in both the data and the technology choice. On the data front, we routinely see clients with many data solutions all of which overlap highly. It is not uncommon for us to see clients with 5-10 separate point solutions or more. They have ID Insight for this, Lexis for that, Experian for this doo-hickey, FICO for that gidget, etc...

However - when you back away from the whiteboard, we suddenly realize that each solution is bringing overlapping data to a separate, specific solution. Whether it be credit bureau information, utility records, etc., we see that these solutions are utilizing very similar or even the same third party databases. This should not really be a suprise, as most solution providers are all going to the same root data.

The end result is a system that connects to many very specific point solutions. The typical solution is very rigid. That is, "our solution looks like this and this is how you connect". Suddenly, we have 8 or 10 rigid pipes, all of which share many of the same components.

So back to ending the madness. In a Utopian world, I would have all the data I need at my disposal in one pipe, and this pipe would not be rigid, but flexible tubing with connections to bring in even more information and data. From a solution side, this utpoian view would also allow me to use the raw data and information to solve for any future fraud types that emerge.

So while today my problem may be takeover, it might be something entirely different next week. Rather than have to go out and find another rigid pipe - why not go to my flexible pipe and just ask to solve for the problem? Under this view, I suddenly realize the enormous benefits:

I don't have to through an RFP to identify the "best" point solution.
I don't have to wait for months (and sometimes years) to solve. I can turn it on immediately and stop the bleeding.
I can also turn certain features off allowing me to reduce cost.
I don't have to manage another vendor and bring another through the Security hurdle.
I get to sleep at night realizing if something new emerges, I am now equipped to stop it quickly.

We see this Utopian view emerging over the next few years. The madness cannot continue and the various consumer, cost, security and compliance pressures are forcing this.

What we see is moving from the world of rigid pipes to what is becoming known as "Platform as a Service". Rather than point solutions, we will move to data and analytic platforms that are flexible and able to react very quickly.

Here are the high level compents of what we see in the future Fraud Platform.

Will have the most comprehensive set of data to solve for 90% or more of all existing and anticipate fraud problems.
The ability to quickly bring in more data as needed.
The ability to ask for any data desired for whatever reason.
The ability to customize your treatment of the data (eg. I want a tight or loose match on address, while I want an exact match on Social security number).
Have multiple modules or components that can be turned on or off as desired. Eg. a bust-out module, a custom score, a takeover module, etc..
An easy to use web-anabled dashboard that allows the client to quickly and efficiently enable data, solutions, modules, etc...

We recently launched the next version of CompleteID and in doing so, enabled users to do many of these things. Customize scores, alter rules, changing matching criteria, customize data sources, etc.

This is already resulting in many new customers. While solving for the immediate problem is necessary, clients realize the power of being able to have a flexible system that can react quickly.

Stay tuned as we continue to remove the rigid pipes and move to the Platform.

A.E>>>

Arkansas is the Most Competitive BroadBand State. Huh?

2010-04-23T10:13:00.007-05:00

Yesterday, we launch our most recent research report proclaiming that Arkansas topped our list as the most competitive state in terms of broadband internet. Likewise, Rhode Island took up the last spot. Here is a link to the release and the accompanying research report.

http://www.idinsight.com/news/p_04222010.asp

As most in the broadband community know, the debate around competition and competitive markers is heating up. The FCC is deeply interested as are the providers as should all consumers. After all, as Americans we believe in a free market economy and vibrant competition.

That is why we felt compelled to take a deep look at this issue with respect to what the data tells us. We spent over 4 months analyzing the data and having many late night skull sessions discussion the findings and maybe more importantly "what constitutes competition?"

In the few hours that have transpired since launching this report into the cyber world, we have already received a lot of feedback - some good, some bad. I welcome all feedback as it is a very worthy debate and makes us think.

As you look at competition, I would say most have gravitated towards a definition that says "Competition is present when consumers have multiple choices". One recent publication came out and said that 95% of all U.S. housholds have access to at least 4 broadband choices. The conclusion is that for the most part we are competitive.

For us, as we discussed, we began to question that definition. For example, in the Twin Cities, it is very well known that Comcast is to premier cable provider while Qwest is the dominant DSL provider. When you look a layer deeper, you will see some other providers present - but are they really competitive? You certainly never hear of them on the commercials and my mailbox is not being bombarded by direct mail ads to sign up for Hickory Tech. I know there are wireless and satellite services probably, but I am sure most do not think about that.

In addition - things like pricing, speed, customer service definitely impact competition. With that being said, we adopted the most standard definition of Competition. Of course, we can find on Wikipedia. And here it is:

In economics, perfect competition occurs in markets in which no participant has market power. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Nonetheless, the concept of perfect competition can serve as a useful benchmark against which to measure real life, imperfectly competitive markets.

I think that most could at least look at that definition and say it is logical. In fact - it is the standard in economics. After much head scratching - we went with the standard. From a data stand-point, this then says that the most competitive states are the ones where markets powers are not present and multiple viable competitors are present.

To come up with our metric, we basically said the following. In a Perfect Competitive Market, the top providers would have equal market share. To determine that Perfect State, we assumed the following:

- We looked at the top 10 providers in each state.
- We then said it was Perfect if all top 10 providers had 10% market share each.
- We then measured each state's actual market share for the top providers against perfect.

The more that a states actual market share drifted away from Perfect - the lower they ranked. The more they resembled the Perfect Market conditions described above the higher they ranked.

After this measurement and ranking process, we can then look at the data. And when we do, the rankings begin to make sense. For example in Arkansas, there are 6 providers that have greater than 10% market share. However, we observe that in Rhode Island the top 2 providers command 95% of the market and the rest are in low single digits.

If you accept that definition of competitive markets, then it becomes very interesting to analyze the characteristics of states that rank high and those that rank low. In doing so - we observed some startling observations.

First of all, we saw a very definitive trend that showed that as the average income and home values increased for a state, that competition went down. Likewise, as the percent of people using the internet increased, competition went down.

Stepping back and thinking about that raised some very interesting thoughts. In short - the most lucrative markets tend to have fewer large market players. This seems to make sense to me. Eg. you tend to see Qwest in certain markets and Verizon in certain markets, but not a lot of overlap. Why? I am not a network infrastructure expert, but it would seem that as a particular provider comes into a market and builds out their infrastructure over a number of years that is difficult from someone to come in and do the same thing in a much shorter amount of time.

To me - this is where it gets really interesting. Broadband is infrastructure much like it was with roads, schools, airlines, telephone, etc.. And it appears that we are heading down the same path with broadband. Today, we see only a handful of airlines. However - every time I fly, I know that I at least have choices and can go to Expedia to see where I can get the best price. Likewise, with phone, I now have reasonable choices such as cell phones, VOIP, local phone companies, etc...

But what about broadband? If we are truly moving to 100 mgbps or 1 gbps of speed, and the only way this can be delivered is Fiber, and we think back to the competition debate above, it makes me wonder. Will we have choices in the years to come or will we be creating even less competitive markets? I am not sure, but I sure am curious.

A.E>>>

Top 5 Business Resolutions for 2010

2010-01-13T11:03:00.003-06:00

I am in the midst of trying to stick to my New Year's Resolutions and this year also decided to put together my 2010 Business Resolutions.

Resolution 1: Be More Authentic

In the world of webcasts, email barrages, etc. it is difficult to come across as being authentic. People are tired of the "in your face" selling approach hidden behind the veil of a blog or information rich webinar. I have resolved to treat each communication with our clients and prospective clients as one that provides valuable information in a style that reflects who we are.

Resolution 2: Happy Hour

We need more happy hours - The name says it all! I am not resolving to drink more, but rather to celebrate more. I haven't run this by my wife Kelly yet, but if it is a Business Resolution - I think I have a chance.

Resolution 3: Start Writing that Book

For years, I thought about starting a company, and I finally did. The other topic I have pondered is to write a book. I keep bouncing back and forth between a business book, a children's book or fiction. The titles will range from "Building a Business out of Bubble Gum and Shoestring" to "Mr. Magoo Goes Bananas". As you can see - I have some work to do on the focus, but resolve to finally figure that out and at least write the introduction.

Resolution 4: Twitter

I can now spell it, so that's a start. I resolve to finally figure this out and make it part of my day and our communications strategy. I am a GenX guy, and looking to get with the times and this whole social networking world.

Resolution 5: Lunch

I resolve to make enough time each day for lunch. Try as I might, I many times find myself skipping lunch. I am going to start by putting an Outlook Reminder on my calendar, so that nice lady on my Blackberry will remind me "Adam - time for lunch". I am trying to figure out how I can super-impose my Mom's voice into that message. Of course, that is too technical and I will hold on that one until 2011.

I am a little worried about this resolution as it is in direct conflict with my personal resolution to lose some weight. Kelly tells me that I can eat nuts, berries and salads and kill two birds with one stone. I hate it when she's logical. Dang!

A.E>>>

Beware the "Black Box"

2009-12-18T15:36:00.003-06:00

Throughout the course of my career I have developed hundreds of analytical models that have been or are being used by many of the banks, credit issuers and direct marketing companies in the country. Statistical modeling is not a topic that I typically bring up at cocktail parties or in general conversation - as it it is the equivalent of administering a few doses of vicodin mixed witha shot of bourbon....zzzzzzzzzzzzzzzzz.

However - there is one topic of modeling that has interested me for many years and should be of interest to the general model consuming public. That topic is that of the "Black Box" approach to selling model based solutions.

Back in the 90's when modeling solutions were coming out of the woodwork, a variety of companies begin marketing their models and scores as their differentiator. The typical tagline was that their solutions were superior because their analytics and analytic teams were "better".

A prime example of this was the Falcon product from HNC which today still is the modeling platform for the majority of all card transactions world-wide. HNC brought neural networks to the industry and they positioned their solution as superior because of those deep analytics. And guess what - it worked! The positioning catapulted their solution to the top and they never looked back. However - if you ever asked HNC what was behind the modeling, they would tell you it was a "Black Box". That is, it was the secret sauce and could not be divulged.

A couple years later, I was presented with a similar situation. I was jointly developing a model with the old Fair Isaac (now FICO). While it was supposed to be a joint effort, when I asked to review the models and codes, their lead analyst informed me that he could not divulge. I asked why not, and he told me that it was a "Black Box", could not be divulged and I probably could not understand anyway. As a trained statistician, all I heard was - "We're smart and you are stupid".

That is when I began to become fixated on the implications of the "Black Box" approach to marketing scoring based solutions. At the time, FICO positioned themselves as the "Gold Standard" in modeling. However, their prospects, clients and competition were referring to them as the "Four Letter F Word". I do think that over time, this has led to their market erosion and loss of credibility.

Most of the people I have ever met from HNC or FICO are, indeed, very smart people. However, when you take the "Black Box" approach to positioning scoring solutions - I think you are jeopardizing your brand and doing a disfavor to your people. After repeatedly hearing "We're smart - you're stupid", eventually people grow tired of it. After all - I don't think anyone likes to be told that they're stupid or incapable of understanding. Especially when it is not true. There are tens of thousands of modelers out there who know exactly what I am talking about.

I have always been a firm believer in transparency in the modeling and scoring process. As solutions providers, we exist to solve problems and provide value. When we throw up the "Black box" it undercuts our value proposition and opportunity to be collaborators. That is why we always work closely with our clients and give them deep understanding of what it is that drives those models. This does not mean that I have to pull out the source code or hand over the actual model on a silver platter. We all need to protect our Intellectual Property. However, this transparency secures a position of collaborator and partner. It also leads to deeper understanding from our clients about what is driving their business.

Transparency in modeling and scoring is becoming more routine over time, as model developers and users understand that it is one piece of the solution. However, it still amazes me that there are some select companies today that are positioning the "Black Box". I welcome that competition. I have to say that I don't mind my competitors positioning themselves as "We're smart - you're stupid".

A.E>>>

When Will the Madness End?

2009-11-02T09:58:00.003-06:00

For a fourth time, the FTC postponed the Red Flag compliance deadline for non banking regulated companies. The original deadline was to be November 1st, 2008. It was set to go live on November 1st, 2009 and now they have pushed it back to June, 2010.

http://www.networkworld.com/news/2009/110209-layer8-ftc-red-flags.html

This new compliance requires non banking institutions that could be exposed to identity theft to put in new procedures to detect and mitigate identity theft. For example, health care. Medical identity theft is growing as people are using stolen identities to receive medical services in a victim's name. You can see that it might be a good idea to have health care providers to makes sure that doesn't happen.

Dear Mr. Elliott, we see that you owe us $25,000 for a liposcution treatment that you received in Los Angeles". Huh?

According to the press release, the 4th delay was caused by members of congress saying that the new compliance is not well understood and we should not punish companies. Huh?

Since when did making sure that companies that receive confidential identity data use it wisely become unfair. In the credit card world, for anyone receiving credit card information - they must be PCI compliant. They must have standards in place to make sure that do everything possible to minimize credit card numbers from being compromised.

However, when it comes to a persons identity, we once more say that this isn't as important. Ironic. If your credit card is compromised, the consumer has a $50 liability and that's the extent of the damage. If your identity is stolen, you may have years and thousands of dollars expended before you can clean it up, if ever.

Priorities? In the meantime, identity theft rose again in 2008 and all expectations are that they will rise again in 2009.

A.E>>>

Fox Guarding the Hen House?

2009-11-02T09:31:00.002-06:00

This is the last topic I thought I would be writing about, but in the past few weeks it has caught my interest in a big way.

A few weeks ago, a colleague of mine that works for a regional high speed internet provider called me to ask if ID Insight maintained information about which households in the country have high speed internet access? When I asked why, I didn't realize how this would lead me on an odyssey canvassing the government, the Obama Stimulus package and a lot of bickering.

The Broadband Stimulus Package is a $7.2 Billion grant program that is part of the American Recovery and Reinvestment Act. Remember: Cash for Clunkers? Ya - that one. Anyway - the Broadband stimulus is intended to bring high speed internet to the hinterlands of rural America.

The way the grant works is generally as follows. If you apply and receive a grant, the government will subsdize 80% of the costs to bring high speed to a particular area. So, if you are a regional operator and it would normally cost you $5 million to lay down the fiber, cable, etc... now it will only cost $1 million. Obviously, this can be very lucrative for the carriers and enable high speed to areas where it may have previously not been possible.

Here's the kicker. To receive a grant, the applicant must demonstrate that an area is under-served. Here's the second kicker. The data does not exist. So how do you get the data? Enter Connected Nation. This non-profit was formed to obtain the data and information needed. They do this by working directly with the carriers to obtain their subscriber lists and develop these broadband maps.

Sounds logical on the surface - right? However, when you do a deeper dive, you find the following. Connected Nation was formed and is managed by the biggest telcos in the world. You know 'em - AT&T, Comcast, Verizon, etc....

So here's the rub. Many smaller and regional telco's are vying for the grant monies, but they don't have all the data. When they apply, the big telco's are now protesting those grants saying that the area is "served". They then hold up Connected Nation as their proof. The regional carriers are left to try to disprove. Their motive is to not allow competition where they don't want it.

The regional carriers and municipalities are furious. And they should be. Why should the major carriers be able to control who goes where and stifle competition? Connected Nation lobbied for this data requirement, and then turned around and lobbied for a separate grant of $350 million to collect the data themselves. Wow!

This saga will continue to play out in the weeks and months to come. Attached is a recent report issued on Connected Nation.

http://www.ntia.doc.gov/broadbandgrants/comments/61BC.pdf

Also - we have a little secret. We have already compiled the data, and it was not collected through the major carriers. It cost us just a trifle less than the $350 million that the government just set aside. Shhhhh. Don't tell anyone.

Why I Depise PowerPoint

2009-09-16T16:53:00.006-05:00

It seems like we live in a PowerPoint world these days. As a provider of financial services solutions, my day is filled with meeting after meeting and presentation after presentation. The vast majority of these meetings are over the phone - especially for those 'first' appointments.

And of course, the medium of choice is our old friend PPT. Couple that with WebEx - and you've got yourself a meeting! It is from there that it is all downhill. After spending hours and sometimes days crafting this masterpiece - the meeting kicks off and jumps right to the AGENDA. From there, you jump into the next slide, the next and so on.

All the while, your audience is on the other end and you have no earthly idea what is happening. Are they sleeping, are they listening or are they busy catching up on their last week of emails. I don't know. I do try to periodically check in and ask if there are any questions. Sometimes that gives you a clue, when there is about a 10 second pause, and then: "Sorry - I had you on mute." Or even better yet, when they put you on hold and they have some lovely music playing in the background.

When they are engaged and asking questions, it is more often than not that these questions lead me to jump past slides or abandon the carefully crafted deck all together.

Because of this - I avoid PPT at all costs. Sometimes it is the necessary evil - especially when you have a large audience and you have information that needs to be on the printed page. However, more often that not, the carefully crafted deck is useless and a complete waste of time.

Especially when you are on a first appointment and your job is not to present your latest gadget, but to listen and discover. I can't solve a problem if I don't know what the problem is or they do not understand yet what their problem might be.

To me, PPT has become a crutch for verbal vomiting and self adulation and comes at the expense of valuable dialogue. I will be speaking at a conference in October, and of course the first thing they did was send me instructions about when and how to upload my PPT. I wonder what they are going to think when I say "I don't have one".

Here's a recent blog on the best and worst of PowerPoint.

http://news.bbc.co.uk/2/hi/uk_news/magazine/8213901.stm

Latest Threat

2009-09-08T14:47:00.003-05:00

Last week we came across another fraud activity that I thought I would share. I was speaking at a conference last week and there was some discussion about one of the latest threats related to altering of a person's credit report. Not exactly new, but renewed.

The scam is as follows. The credit bureaus, by law, have to remove delinquent information from a consumer's credit report within 4 days of receipt of a valid affidavit of identity theft from law enforcement. Once the bureau has the form and the accounts that should be 'sanitized', they then have 4 days to remove.

Makes sense if, indeed, there was identity theft present. However, this is not always the case. The bureaus are finding that many of these affidavits are counterfeit or fictitious. In fact, they went on to describe that they are getting hit particularly hard in the Southern California area and that many suspected reports tend to all have Armenian surnames.

They then went on to describe how there are a bunch of credit repair companies charging hundreds and thousands of dollars to clear a consumer credit report. This is how they are clearing.

Flash forward 24 hours. As I boarded my plane back to Minnesota - I brought up a data study for a prospect - hoping to see if we could help them identify a particular fraud ring they were seeing. At first - the frauds that we analyzed did not seem to out of the ordinary. However, at second glance, we realized that they were all Armenina surnames out of..... you guessed it - Souther California.

This one is pretty scary. Scary - because they all tended to be verified, have good credit, no real fraud characteristics, etc.... Once that credit report has been 'sanitized', they are free to resume roaming and take everyone to the cleaners.

I am sure that once they steal their next batch of money, they just return to their 'buddy', re-sanitize and do it again.

Are our credit granting systems under attack? Is this a pre-cursor of things to come?

A.E>>>

Broadband Stimulus Data

2009-08-26T12:07:00.003-05:00

Over the past few weeks, we have been bombarded with requests for broadband connectivity and internet usage data. Turns out that as part of the Obama Administration's American Recovery and Reinvestment Act that $7.2 billion in Federal grant monies have been set aside to help bring high speed internet to communities without access.

For those that receive a grant, these companies and communities receive $0.80 on the dollar for all expense to provide the access. Pretty good incentive if you asked me.

However, for companies and communities to apply for the grant, they must have data and maps that shows the current connectivity and usage. That's the dilemma. That data does not exist. Why? Because only the carriers have this data and they treat as highly confidential. However - a requirement it remains.

As such, many communities and carriers have not been able to apply for these substantial grants. That is until now. We recently announced the development of the first national database of internet connectivity and usage down to the Census level geography needed.

By accessing our proprietary databases of internet users, we were able to combine with our analytics to produce the data and maps needed.

Pretty exciting stuff. Who would have thunk that a company focused on ID Theft and fraud would be creating a database to enable a computer in every home and classroom. Should be interesting watching this all play out.

A.E>>>

Data Breach Blahhhh!

2009-08-24T14:37:00.004-05:00

I just got done reading my latest article regarding data breaches.

http://www.smartmoney.com/spending/budgeting/dingbat-data-leaks/

In this article, like many others, the author discusses how data is lost, that most breaches are accidental in nature, and the fact that 50% of laptops that are misplaced have personal identifying data.

This focus on data breaches and better protections is doing little or nothing to reduce the rapid increase in identity theft. In fact - it is diverting our focus from what is the much more important issue "What can I do with the data".

If we add up all the breaches and data losses, I would imagine each of our individual ID's are out there in cyber land many times over. That is not the issue - the issue is what can I do with the data.

For example - If I simply need to present that data to open a new credit card account and they open - then this is the problem. If I can use the data to create a fictitous Driver's License which then is used in a routine traffic stop, then this is the problem. If I can use someone's data to receive medical service in the victim's name, then this is the problem.

The point is - the data is out there. While it is good practice to do all we can to secure data, it is not going to address the problem. We need to be spending our time, energies and monies on developing secure systems that do not allow someone with a print out of your personal data to take you to the cleaners.

A.E>>>

The Next Criminal Hero

2009-08-20T16:10:00.002-05:00

For years, Americans have held a deep fixation with criminals, many times transforming them into heros. Every generation seems to have their criminal heros. We can go back to the 20's and 30's with Bonnie & Clyde, Baby Face Nelson, Al Capone, etc... Then the 60's brought us our first white collar crime hero - Frank Abignail, who was the subject of the movie "Catch Me if you can".

Of course, the 70's brought us the trio of The Godfather movies, and made the Corleone's America's favorite crime family. This was followed up with copy cat John Gotti.

Then in the 80's and 90's, Kevin Mitnick (The original computer hacker)was convicted and became the posterchild for young hackers everywhere. Much like Abignail, Mitnick turned his criminal activity into a gold mine by going on the road and telling everyone how he did it.

Now - we have our next posterchild - Albert Gonzalez who was recently arrested for the Heartland Data Systems breach. What makes this even more entertaining is that he was also arrested in the TJX data breach a few years earlier in 2003. Rather than throw him in the slammer, he instead became an informant for the Secret Service. A few short years later, he has achieved his goal of international fame and worship.

For those not in the banking industry, his compromise of Heartland created major havoc for banks everywhere. If you received a new credit or debit card in the past few months, it is likely due to the breach at Heartland. Banks were forced to investigate which cards were compromised and had to re-issue millions of cards. Thus far, this has cost Heartland over $32 MM in fines and losses.

So the next time, you get a fee increase from your bank, you might want to thank Albert. This may alter our collective opinion regarding his hero status.

In the meantime, Albert will go spend a few years behind bars thinking about his crime. More likely, he will be writing his business plan for becoming the next in a line of criminals who turned their misfortunate into a gold mine.

A.E>>>

Back to the Basics

2009-08-17T11:20:00.002-05:00

Well..... now that Tiger crumbled over the weekend, it is back to the grindstone.

The past few months have been nothing short of phenomonal. The economic challenges within the banking industry have resulted in a period of time that will be well remembered for years to come. Much like the dot com era or 9/11, this period will be one in which we will reflect on.

Thankfully - things seem to be on the upward trend, but who knows. However, as I reflect on the past few months and quarters, I have realized some very important lessons with respect to business.

1.) Be wary of the teflon mentality. When this crisis first emerged, the initial reaction was "it hasn't really effected us". A few short weeks and months later - we realized it had - in ways that we hadn't imagined.

2.) Don't get diverted. When a core market segment is impacted, the natural inclination is to see if you shouldn't be pointing your guns elsewhere. I am glad we did not, as sales activity is beginning to return to levels of past.

3.) Have faith. It's difficult to remain focused when you think you have the right message, yet things get more difficult. Does the message need to change? What am I missing? What we found was that the message was right and by focusing on it made all the difference.

4.) Maximize your resources. More than ever, the latest environment forced us to understand to a greater degree what resources were absolutely critical to success and those that were not. By removing un-needed expense and resource, we were able to streamline our operations while minimize our expense.

All in all, I will be happy if the climate over the past few months never returns. At the same time, it has been a great learning experience and we are coming out on the back-end of this more operationally sound than before. The next few months should be entertaining.

Good Hunting out there,

A.E>>>

Why I Hope Tiger Wins

2009-08-12T09:12:00.003-05:00

Being a Minnesotan, I spent Monday afternoon over at Hazeltine National as PGA Championship week kicked off. While it was only a practice round on Monday, everyone was asking of there were any Tiger sightings. Tiger was there bright and early, but we got there late and missed him.

Of course, Tiger is once again favored as he has won an astounding 30% of tournaments he has entered. What perplexes me is that each and every week, I find myself rooting for Tiger to win, even though he has more money than god and may be considered the greatest golfer if he does nothing else.

Why it is perplexing is that like many, I am always for the underdog. Whether it is a football, tennis, baseball or hockey contest - I almost always root for the underdog. I think it is built into our DNA.

However, when it comes to Tiger - I am always hoping that he wins. Why? In analyzing my brain, I think it is simply because I love the way he prepares himself and am absolutely astounded by his mental preparation. In short, he can almost will himself to win. As a colleague told me this morning - he just gives his opponents the Jedi glance, and they crumble. The only other parallel I can draw is to Lance Armstrong.

I think that these two human beings are case studies for mental fortitude. in many ways, they are heros of mine, as they always seem to rise to the occasion. When I wake up in the morning and begin thinking about ID Insight - I remind myself of what it takes to be a Tiger.

He is an inspiration to me and many others, and I hope that he is able to will himself to his 15th major this week.

A.E>>>

Can we make the RFP R.I.P.?

2009-07-30T14:30:00.003-05:00

I was recently reading "Exceptional Selling" by Jeff Thull. The subtitle is "How the Best Connect and Win in High Stakes Sales". Thull offers a bevy of great advice about how the old way of selling is out the door - especially when it comes to complex sales that involve many pieces.

As I was reading - I came across a chapter where he talked about why Requests for proposals (RFP's) result in bad sales. He mentions how winning an RFP is akin to winning the lottery. He goes on to talk about how the process outlines a client's wish list and a defined decision making process that dissuades creativity and finding the optimal solution. In a complex sale - the RFP process does everything to attempt to reduce solution providers to a commodity.

I couldn't agree more. I can see where an RFP might make sense if you are buying toilet paper and there are 5 brands with similar features and it all comes down to price. However - when you are selling complex solutions to sophisticated buyers, the way you get to the optimal solution is to foster creativity and "out-of-the-box" thinking. When you get stuck into the RFP fifedom - usually with procurement - you end up with an invisible wall in front of you that does not allow for the interactivity that is so important to the process.

Thull goes so far to suggest that at times you need to walk away from RFP's. He discusses the opportunity loss that needs to be considered amongst other things. Even when I have been on the winning side of the RFP - the next steps are much more cumbersome. Why? Because you really need to back up and get into creativity side of things. Many times - both parties find out a lot about what should have been knowon up front. I have seen many a partnerships go bad because of this.

At the end of the day, people buy from people and fostering deep understanding results in a better outcome for all sides. I am not sure the RFP is going to be laid to rest anytime soon, but it wouldn't bother me.

A.E>>>

What Sucks with Social Networking

2009-07-01T12:24:00.002-05:00

I am doing my best to get my GenX brain around this whole social networking thing. I also have to explain that I am a borderline GenX'er and was extremely close to being a 'Boomer.

That being said, I have done everything I know how to do with LinkedIn and Twitter. I guess at this point - I have about 317 connections on LinkedIn and belong to 19 groups. On Twitter - I am following 12 people and have 9 people following me.

I obviously find some value or at least potential value by using these tools - but that's no fun to write about, so I thought I would instead right about what sucks.

- I am sick of these groups on LinkedIn. I am bombarded with group discussion boards, when more than half are commercials in disguise or just blatant job postings. LinkedIn needs a better way for Group Leaders to police this. I admit that in the early days - I was trying to promote - until I realized how much it bugged me. So - yes - I was an ass and I apologize to anyone I offended.

- You can't sync accounts. If you by chance set up 2 separate accounts on LinkedIn and are trying to merge - don't bother. When you look it up in the FAQs - it says "Don't bother".

- Why do I have strippers following me on Twitter? I am a neophyte on Twitter, but this week I got notice that some lovely looking woman was now following me. When I looked at her BIO - I realized she was a stripper. Not that I am against strippers, but I was trying to envision myself at my Twitter home page with my wife seeing this seductive stipper sending me comments about what she was doing at the moment.

- Why is it so hard to find people on Twitter? I look up Bill Gates, and it tells me I can follow "NotBillGates". However - I did find and begin following Barack Obama. Mostly - because I am most curious on the subjects that our leader Tweets on. We'll see how that goes, but for now - it is boring.

- How to Tweet your horn. Now that I have 9 people following me - all but one that are not strippers - I feel compelled to tweet. However - I am striking out on what to say. "Hey - just got done eating a burger and it was yummy", or "just mowed the lawn - man its hot".

Anyway - thanks for letting me rant.

Peace Out

BFF Adam

Medical ID Theft: The Next Wave

2009-06-15T09:59:00.003-05:00

With all the attention over the past few years on Identity Theft in general, there is a new trend that is continuing to gain momentum. While identity theft in general has leveled off a bit, the category of Medical Identity Theft is continuing to be more of an issue.

Medical Identity Theft can take many guises, but can be thought of generally as someone using your identifying credentials to receive medical services. This could be anything from an emergency room visit to reconstructive surgery. With the costs of health care continuing to sky-rocket, this should come as no surprise. In fact, when compared to financial service where the average 'loss' is around $10,000 - this can be quickly dwarfed when it comes to health care.

The latest crime stats from 2007 suggest that over 250,000 consumers were the victims of Medical Identity Theft. Much like financial services, the typical fraud can involve either someone using an existing Insurance ID and policy information to utilize an existing account, or alternatively, apply for new services in the victim's name using the stolen ID information such as SSN and DOB.

Historically - health care providers have not deployed the scrutiny in the new account opening process as banks. However - this is beginning to change. Partly due to the increase in related fraud, but also due to the FACT Act provisions which will require health care providers to screen for Medical Identity Theft. While health care providers have not fallen under the regulatory banking agencies, they will now be regulated with respect to Identity Theft practices by the FTC - As of August 1st, 2009.

With the new mandate to electronify all medical records - we expect to see a lot of activity here over the next few years.

Supreme Court Makes Decision on Identity Theft

2009-06-11T13:01:00.002-05:00

A unanimous Supreme Court said in May that illegal workers who use falsified IDs can't be considered identity thieves without proof that they knew they were stealing real people's Social Security and other numbers!

How ridiculous is this?

The court, in an opinion by Justice Stephen Breyer, rejected the government's argument that prosecutors need only show that the identification numbers belong to someone else, regardless of whether the defendant knew it.

So - here we all are trying to deter identity theft, and our Supreme Court says it can only be prosecuted when someone "knows" that the ID was real. This is rarely the case. When people buy and steal IDs, they rarely ever know if they are indeed real.

This case was brought forth due to immigrants who were accessing various IDs to gain employment. However - this ruling I am sure will now make its way into the financial services sector.

Can we turn our brains back on...... please!

Here's a link to one version of the truth.

http://www.brownsvilleherald.com/news/identity-98001-theft-used.html

Examinations In Process

2009-06-02T11:29:00.005-05:00

We are finally beginning to get some good information regarding how banks and credit unions are doing coming out of their initial FACT Act Red Flag audits. The great news is that our clients are being given a passing grade by the auditors for using our Safe2Change solution to meet the address change provisions of FACT Act. Great news, because they deloyed Safe2Change as a much more cost-effective solution to complying versus sending out letter confirmations. At a time when costs are more critical than ever, saving some dollars here is very important, and our customers are able to realize these savings.

More interestingly, we are seeing a couple of general trends emerging from these audits that are worth thinking about.

Looks like the auditors are being somewhat lenient in this first pass. Clearly there are the handful that completely ignored the regulation and are getting it with both barrels. However - in the first round we are hearing that they are generally not having many issues.

The one gap that we are hearing now repeatedly is that the examiners are beginning to scrutinize compliance strategies where financial institutions are mailing letters to the customer's old and new address to achieve compliance. The issue is sufacing not because of the letter mailing strategy, but because FACTA requires that the institution not fulfill subsequent requests credit cards, debit cards, checks, etc. until the consumer has had enough time to receive and respond to the letter. This makes sense. If the institution sends out a letter and then sends the requested card to the new address (where the fraudster is waiting) - then this strategy will still still result in identity theft.

We are finding that most institutions have deployed the letter mailing strategy. However - we are also finding that these same institutions are not putting a "hold" on the account to block the request for cards and checks. This is not allowed per the FACT Act, which states that you can send letters, but not fulfill these additional requests until enough time has passed.

In these early examinations, we are hearing this issue being brought up repeatedly. While the examiners are being a bit lenient in round 1, we see this as being an issue that will be scrutinized much more and that financial institutions will need to plug this hole.

A.E>>>

Subscription Pricing?

2009-05-14T11:05:00.002-05:00

For years, the largest banks have deployed fraud tool after fraud tool. In doing so, the typical end result is a combination of many tools that overlap in form and function.

This makes it difficult for institutions to bring in additional tools or functionality to improve their fraud detection capabilities. One of the major barriers is price. As more and more tools are deployed - the incremental benefit is reduced - yet it is rare for the fraud solutions provider to alter their price based on this.

One of these new tools is what can be referred to as "Velocity" or Link Analysis". Most institutions know that an important piece of their overall strategy is to monitor repeat activity at the same address, phone number or Social Security Number. Eg. why have 5 unique people all applied at 123 Main ST in the last week? However - most insitutions have either not deployed that or are doing it in a rudimentary way.

We have developed a new technology that takes velocity and link analysis to a new level allowing our clients to expose fraud rings that they have not been able to see before.

However - while the value can be realized - we run into this dilemma described above. Because of this - we are beginning to think about a subscription based pricing model that incentivizes more volume not less. End result - better detection - less cost.

What's in an Address Change?

2009-04-20T15:02:00.003-05:00

We've been spending the past few years understanding everything there is to know about the 'risk' of an address change for financial services companies. We know that this is the leading indicator of account takeover and a major reason for the new Red Flag Guidelines.

Over the past few weeks, however, we have begun to look at the business problem a bit differently. While the address change event is associated with risk, this risk is relatively low. However, we are finding that the address change event is the single largest reason for a customer leaving the bank!

We have found that approximately 70% of all consumers that move consdider changing their primary banking relationship and that nearly 25% of consumers do end up changing their primary bank account within 120 days of moving.

When you think about it, it make sense. When you move, many times you move away from the bank branch where you conducted your banking. In doing so, it is somewhat likely that you change your bank account to be closer to the branch. Couple this with the fact that banks routinley are targeting new customers with Free $50 offers, and you can see how 25% of movers change banks.

When you consider that 15% of a typical banks customers move every year, this equates to 3.75% of their deposits walking out the door. When we ask banks what they are doing to retain these customers, the answere is almost always "nothing".

We believe there is a major opportunity to stop a significant percentage of these customers from attriting by communcating more effectively. For example, telling them about your remote banking options, or offering up a home equity line to someone that moved into an owned home.

We are beginning to look more holistically at the Address Change Event as being one of the most important in the customer's lifecycle. An event that includes bothe risk AND opportunity.