Threatmetrix creates virtual personas out of digital debris to detect internet fraud

When you shop online, you leave behind a digital trail of debris -- information about the device you’re using, your IP address, e-mail account and credit card information.

These digital debris, anonymized and encrypted, are now being swept up by a company called Threatmetrix to form a digital persona.

Whenever an e-commerce platform executes a transaction, it can be matched against a database of digital personas in real time to determine if the sale is genuine, or if there’s any fraud involved.

“We help e-commerce companies and banks figure out who’s a good person and who’s a bad person, in real time,” said Armen Najarian, chief marketing officer of San Francisco-based Threatmetrix, in an interview in Hong Kong.

Founded in 2005, Threatmetrix’s database now processes 75 million transactions every day across the globe. Its database carries information of over 4 billion unique devices, over a billion login credentials and 670 million IP addresses, according to Threatmetrix. Najarian said that the company has been 95 per cent accurate in determining whether or not a transaction is legitimate.

“Threatmetrix references bits of information coming through from the transaction against the network we have amassed over the years,” he said. “We’re looking for a few things - do we recognise the device that the person is using? Are these credentials, or the e-mail address used known to us?”

China, the world’s second-largest economy, is one of the most promising markets for Threatmetrix.

Already, goods sold online accounted for 11.6 per cent of total retailing in the most populous country on earth, according to Bloomberg’s data. In the first quarter, online shopping transactions reached over 971 billion yuan (US$145 billion), according to iResearch.

Alibaba Group, the world’s largest retailer, is a key customer for Threatmetrix. The retailer’s Taobao Marketplace and TMall platforms are expecting 600 million transactions valued at an estimated 130 billion yuan on November 11 alone. Alibaba is owner of the South China Morning Post.

Threatmetrix is already working with Alipay, the Alibaba affiliate that handles electronic payments used on Taobao and TMall.

“We work specifically with Alipay for cross-border transactions [coming from outside China]. Consumers now want to be able to buy items from anywhere in the world, but the rejection rate for such transactions are five times higher than those domestically,” Najarian said.

“That’s where the biggest challenge is for Chinese merchants who want to do business and be truly global,” he said. ”We authenticate the cross-border transactions coming from outside of China to make sure that these are safe transactions and not fraudulent ones.”

A spokeswoman for Ant Financial, the company that operates Alipay, confirmed that Threatmetrix is a vendor to the electronic payments system, declining further comments.

Threatmetrix, which is setting up its Asia hub in Hong Kong, also works with companies such as China’s Ping An Bank to verify the legitimacy of loan applications, as well as Facebook to verify that certain e-commerce transactions made on the platform are from authentic buyers.

“If you look at traditional forms of authentication, the model revolves around having someone’s name, social security number and physical address to make a decision about whether a transaction is legitimate, but these decisions are not made in real-time,” said Najarian.

This poses a problem for countries like China, where there are more people with smartphones than with a known mailing address, he said.

“The world is fundamentally changed, it is now mobile first, with a digital, global economy where traditional forms of authentication are insufficient,” he said, adding that Threatmetrix is able to fill the gap for merchants in markets like China.