mConfirm's ID confirmation via cell phone application has lots of credit card companies interested.

Gali Weinreb and Hanan Lifshitz

It sounds like a fantasy of the secret police in a totalitarian country: someone pays for something by credit card, notification is sent to the credit card company within seconds, which then contacts the wireless operator, which via its satellites that receive the signals from the point-of-sale terminal, can locate the buyer's precise location. In front of a computer in some damp basement somewhere sits a person who now knows what you bought, how much you paid, and where you are.

In the wrong hands, such information can be devastating, but it also holds out a lot of promise, such as in the plans of mConfirm. The company's concept is simple: You've made a credit card transaction. The credit card company locates your cellular telephone. If the location of the transaction and the telephone match, the transaction is approved. If they do not, the credit card company can activate protective measures or ask for additional verification of the person's identity.

Each Israeli credit card company loses NIS 50 million a year because of fraud and forgery. The problem isn’t credit card theft, which causes fairly easily detectable fraud. More dangerous are cases of credit card copying, in which the forger then uses the fraudulent card for small transactions, without the owner of the real card realizing what's going on.

Under these circumstances, it is easy to understand credit card companies' interest in mConfirm. It is also the reason why Zvi Meshi, former CEO of Visa Israel Credit Cards-Cal (ICC-CAL) and current CEO of credit card transaction security solutions company SafeCharge, decided to enter the fray, and join mConfirm as chairman.

mConfirm was founded by CEO Tomer Eden and director of marketing Boaz Avigad, high school friends from their days at ORT in Netanya. After obtaining a B.Sc. in computers at Ben Gurion University of the Negev, Avigad worked for RAD Data Communications and start-up Marnetics Broadband Technologies (Pink Sheets:MXBTF), which closed. Eden worked in management positions at wireless and clearing companies, and they realized that the two fields could be linked.

"Globes": How did you find Zvi Meshi, and how does he help you?

Eden: "We looked for a dominant and leading figure in the market. This is a quite conservative group that is very hard to break into without an insider to make introductions."

Meshi: "I looked at these two guys. Do you think anyone would invest in them without me? I'm an entrepreneur who loves innovation, and a lot of companies approached me at first. I immediately fell in love with the concept, partly because it was the kind of idea that makes you wonder 'Why didn’t I think of that first?', and because the managers look like the kind who won't make you do all the work. I mediated the connection between ICC-Cal and mConfirm, and ICC-Cal now wants to launch a joint pilot program. The investors - the Office of the Chief Scientist and Jerusalem Venture Partners, which jointly invested $500,000 in mConfirm, came after the link with ICC-Cal was established."

How does a credit card company benefit from a pilot program with mConfirm? Does it get exclusive rights to the finished product?

Avigad: "Companies have a very strong interest in this product being developed and launched. This isn’t a question of exclusivity, because protection against forgery and theft is a common interest for the credit card companies. They've already said they will cooperate on this matter. Why should ICC-Cal care if Isracard captures some forgers?"

How do the wireless operators fit into your business plan? Is the connection through your or through the credit card company?

Eden: "For the initial stages, we've established our own relationship with Partner Communications (Nasdaq:PTNR; TASE:PTNR; LSE:PCCD). But in future, we only plan to sell the software, and we'll let the credit card companies decide on their own arrangements with wireless operators."

Presumably, you'll have to obtain the customer's consent for such surveillance. But customers get no immediate benefit from this, certainly not while insurance companies insure most of the losses. What will companies have to do to obtain this consent?

Meshi: "Under the database law, once it's a matter of locating people, the consumer will have to actively join the service. We believe they will do so, because they'll understand the importance of the service and because they trust their credit card companies. After all, the credit card companies already have so much information about consumers, including the location of transactions just carried out."

Don’t leave home without your cellphone

Can you apply for a patent for such a simple idea?

Avigad: "Absolutely. We've applied for a patent on the actual idea ofr location-based wireless transaction approval, as well as for the algorithm that make it possible. It's not as simple as it appears. What happens if every Friday morning you tend to go out for coffee without your cellular phone? Our system integrates verification with statistical algorithms and other factors, although location is the key element."

The system seems quite straightforward to me. Might the credit card companies try to bypass it, and set up similar agreements with wireless operators, without a mediator?

Avigad: "Why would they want to? We've already invested in development. Why should they begin again from the beginning?"

Eden: "It's not so simple. This is a complex system. You also have to analyze, 'what is location?', 'what constitutes proximity, and what is considered too far?'"

What really happens if I sometimes wander about without my cellular telephone?

Eden: "The cashier gets an alert about differences in location, and can ask you for your ID card or some other means of identification. The business can also cancel the transaction, depending on the guidance from the credit card company."

What are the competing technologies?

Avigad: "One technology is statistical tools, which constitute only a small part of our system. These tools can reveal whether the present purchase is normal or irregular. The problem is that people often deviate from their regular behavior, so this method isn’t always effective.

"Another technology is related to identifying the buyer, such as fingerprints or voice verification, but these are very expensive methods and require the installation of a new infrastructure. Nothing has to be installed for our method. The customer isn’t bothered either, since everything is transparent at the time of the purchase.

"There is no total technology in this field. Thieves are constantly at war with the cops. Our technology is intended for integration with a range of other technologies, in the hope that together they can reduce forgeries."