Welcome to the KuppingerCole Analyst Chat. I'm your host. My name is Matthias Reinwarth. I'm senior analyst and lead advisor with KuppingerCole Analysts. My guest today is my colleague from the US John Tolbert. He's working as a lead analyst out of Seattle. Hi, John. Good to see you. Yeah.
Hi Matthias. Nice to be able to join you again.
Great to have you. And this time we are doing an update on a topic that we covered some one year or so ago. Um, we will be talking about Fraud Reduction intelligence platforms, um, maybe to, to, um, bring our audience also up to speed. What are Fraud Reduction intelligence platforms or from
So Fraud Reduction? Obviously fraud is a, is a huge and growing problem today. Um, sites of all kinds, whether they're financial or insurance or retail are, are struggling with increased amounts of fraud of various kinds and kind of boils down to two major kinds that they have to deal with account takeover and account opening or synthetic fraud. So Fraud Reduction, intelligence platforms are services that, uh, these various vendors that, uh, we're reviewing in the leadership compass provide, uh, as like an adjunct to be able to help these other businesses reduce the fraud that they have to deal with to alert them about that and give suggestions about how to handle it. Um, this is something that we've seen an enormous increase in interest, of course, in the, in the marketplace, uh, due to the increased amount of fraud that's out there.
Right? And last time we talked, there was a leadership compass just having been published. And actually this topic is so hot. Like analysts say that there has already been an update for this leadership compass prepared by you, which is, uh, as of the date of recording of this episode of the podcast will be published tomorrow. So it should be available to the audience once you're listening to this episode. Um, so when there is only one year between the publication of the last version and this version that suggests that many things has happened have happened in the meantime, what has happened in the meantime, is it also due to the two students who, uh, due to the pandemic,
You know, there has been an increase in sort of a proliferation and evolution of fraud techniques out there due to the pandemic early, during the pandemic, we saw a new types, fraud or new targets of fraud. Um, you know, because people are working from home or working from different places, maybe they're in less secure environments, they don't have all the protections that had been associated with a corporate network. Uh, there also been, you know, many different kinds of scams related to, um, metal medical equipment and trying to fraudulently obtain other people's, uh, government relief or unemployment insurance payments, things like that. So it's just really skyrocketed in the last year. And yes, the pandemic has had, uh, a role to play in that.
Right. Um, when we, when you look at the, at the evolution of the market at, at, at the evolution of the product, uh, what are the most striking elements that you've identified? What are the highlights that really, um, make this, um, update of the leadership compass worth reading, even for those who have already covered that topic last year?
Well, you know, I think the vendors have done a really good job in general, uh, of responding to the ever changing threat landscape that's out there. Uh, and that's one reason why I think it was a good idea to try to update this as quickly as we have. Uh, there are some new vendors on the report, but, you know, let me go back to, I look at Fraud Reduction, six major components. First is identity proofing. A second would be credential intelligence, uh, you know, knowing where, um, uh, given credential username, uh, email address may have been used elsewhere for fraud, uh, device Intelligence, you know, reputation, or what do you know about the device from which the given transaction request is originating, uh, behavioral, uh, user behavioral analysis, uh, you know, in a financial or retail perspective that involves, you know, knowing whether or not the current request and transaction is kind of within the scope of what has been asked for by the user historically, uh, if there's been some wild jump in parameters, then you can alert based on that, um, uh, behavioral biometrics, that's a new and very exciting, um, part of the Fraud Reduction landscape as being able to use, uh, factors that can be derived from user's interactions with their devices.
And that can be both using a computer or a browser. Uh, usually that's accomplished by JavaScript measuring how a user types, how they move their mouse, uh, or on a phone. There's a number of different kinds of sensors that can be used to provide information and build a baseline of, is this really how this given user typically uses this device, uh, that also feeds into, uh, bot management and bot detection. Bots are a growing problem as well. Uh, and, you know, oftentimes you can look at, uh, let's say just a series of mouse movements, um, you know, a real user, uh, moves their mouse in a different way than, um, than say a bot would, although bots are becoming increasingly sophisticated to, uh, in terms of trying to mimic real user behavior. So it's, um, it's really kind of a cat and mouse game, uh, just like it is in any other part of, uh, I am our cyber security where, you know, the malicious actors are coming up with new techniques and those of us who have to defend against those are trying to imagine better than, uh, all the time.
Right. Again, if you look at these six capabilities that you just described, um, have they evolved differently across these, over this year, that, um, and where have the, the most, uh, visual improvements taking place?
Well, you know, uh, at the end of last year, we published a leadership compass on consumer identity and access management. And I noticed a really strong uptick in interest on the C I a M side for integrating more information about identity proofing. So, you know, this can be highly regionalized. It can be very specific to countries, uh, ID proofing services that go look at, you know, authoritative attribute information from government agencies or banks and whatnot. But this is also in the Fraud Reduction Intelligence Platform. Those last year, who may not have had much identity proofing integration are adding those capabilities. Uh, and, and this is very useful for CIM solutions to, um, it really helps with things like the account opening or this synthetic fraud, uh, knowing where a user originated, uh, making sure that, uh, the digital account is associated with the real user is a good first step in reducing that account opening fraud.
So I would say that's one of the major areas of improvements. There are a number of the Fraud Reduction, Intelligence Platform vendors that offer this natively. Uh, but increasingly we see, um, many of these vendors offering API access to different services. And in fact, I think that's a real plus if, uh, a Fraud Reduction until vendor can offer the ability to customers to pick which identity proofing services that they want to use. That's again, especially important in cases where you may be doing businesses business in a lot of different countries, and you need to look at different authoritative attribute providers. So that customization, uh, is, is very useful for helping to expand globally. Uh, you know, behavioral biometrics, I think has seen a huge increase in innovation in the last year as well. There are a number of the vendors here that have really, really groundbreaking and leading edge techniques for doing advanced behavioral biometrics, being able to make, um, uh, intuitions, maybe we could call it about, uh, user behavior and what it means.
Um, there are vendors that are doing that in terms of, you know, when a person is, or when a person is creating an account, uh, they, they are familiar with the data that they enter into a registration form, like name, address, you know, various other bits of personal information. But when a fraudster's doing that, the, the patterns become quite different. Uh, you know, you may be able to tell that there's a lack of data familiarity there, uh, maybe copying and pasting from, you know, another application and to the registration form. So those are things that can be detected. And then there are also, you know, very, um, unobtrusive ways of doing things like captures. And some of the vendors in the report this year, I think are, uh, doing some really leading edge things around, uh, subtly changing things on a registration form or a login form, so that a particular action has to be performed. That seems almost invisible to the user, uh, but can be scored by the risk engine in the Fraud Reduction Intel platform. So those are, are things that I think not only help reduce fraud, but they do it in a pretty user-friendly way.
Okay, great. Um, leadership competence divide the leadership into three main categories, product leaders, innovation leaders, and market leaders with product, really looking at the overall product innovation, looking at innovation and the market leader is really looking at the Mar market share. When we talk about innovation, who is driving the innovation in that market, it's the smaller, the unicorn style startups, smaller companies that are very agile or the larger ones, or is there no trend in that?
You know, it is since it's kind of a hybrid between where I like to think of it as a hybrid between cybersecurity and identity, you do find a lot of innovation in the, in the startups or the, the larger later stage, almost unicorn type startups. They're the ones that are sort of peering out on the horizon, looking at what needs to be done and addressing it, and just like other parts of cyber. And I am a, those tend to get acquired after a while. Uh, so yeah, we do see a lot of, uh, in some of the more recently formed become companies, you know, within the last five to 10 years, but there are also, you know, major, um, companies that have been in this business for 15, 20 plus years that are investing heavily in R and D and they are among the leaders in innovation as well. So, uh, there's, there's lots of room for growth, uh, in this market. It's something that's very, very needed. And I think that innovation is really key to making a successful product at this point. Um, so yeah, I think when, when people see the results, you'll notice that there's a good spread amongst the product leaders and innovation leaders. Uh, and it does encompass both newer companies, as well as some of the longer established companies, uh, it's just necessary for being in this market today.
Right. And if we compare the results from last year to this year, have there been major changes in overall leadership? Have there been really strong changes in position, or is it more of the same and the results did not change too much in the leading group?
I think we have a few more leaders. I think, uh, some of the companies that were sort of high challenger last year have made a pretty significant investments in that R and D and now they are catching up. Uh, there are also several brand new vendors that are debuting, uh, in the, uh, leadership compass this time. Uh, they're, they're a little farther down because they may not have built up all the basic capabilities, but they offer some really innovative things that I think it's, it's worth reading the report to understand the differences in the services that they offer. Because, you know, as we always say about leadership conferences in general, just because somebody is the top product or top innovation, it may not be exactly what you need. Uh, some of the smaller companies that are our challengers, uh, may have the exact functionality that you need. So I think it's, it's worth, first of all, understanding your business requirements and then selecting the product that addresses those best.
Absolutely. And that is also reflected in our new online offering the tools choice process, where organizations, where people responsible for a product for a service can really identify their own requirements and map them towards the leadership compass results and get to their own individual ranking. So that's a great, um, thought that you've provided here because it's really, really helps that just being in the upper right corner within some quadrants, some compass does not necessarily mean that this is the right product for each and every, um, use case available. Um, so we, we set that the leadership compass is out now, as people are listening to this episode of the, of the podcast, um, I would highly recommend that, um, organizations have a look at that and also follow this update process of the leadership compass. Any other recommendations that you have, um, to provide for people who are interested in that market segment, uh, what to look at, or is it the leadership compass as the condensed, um, yeah. Knowledge of
That's a really good place. I mean, if I would just say at this point in the game, if you have a consumer facing business, whether you're in retail or, or medical or finance banks, anything facing consumers, you really have to have some sort of Fraud Reduction Intelligence Platform, if you don't, uh, now is the time to do so. And now is also a time to think about is your current Fraud Reduction until provider, uh, doing everything that you needed to do. Uh, again, most of these are very service-oriented, so, uh, it's possible, especially for those that are really API driven, uh, to be able to make it modular, to add on services or changed services as you need. Um, but if you, yeah, if you don't have a free solution, especially integrated with your CIM solution, uh, I think it's imperative that you begin that search now and yeah, the leadership compass is a great place to start, and of course we're happy to take questions, uh, and help out with, uh, those selection processes, uh, if anyone does have questions about great,
Thank you. So this call for action, really do something if you have not yet done. And if you have revise your solution in place to make sure that it really meets your needs. Thank you very much, John, for being my guest today, looking forward to seeing you again in the future. And, um, yeah. Um, thanks for your expertise here and for this great research that you provided.
Thank you, always a pleasure. Thank you. And bye-bye.
