Combating Identity Theft

Identity theft is the major security concern facing organisations today. Indeed, for the banking industry, it is the number one security priority for 2006. In a recent survey of security budget holders and influencers of UK banks, 73% of respondents cited identity management as the top transaction security concern. The survey also showed that identity management has moved from being fifth to the most important driver for transaction security spend in UK banks. In addition, the number of UK banks assigning separate budgets for identity management has risen from 22% to 60% since 2003.

ID theft has increased by 500% since 1999 and now costs the UK economy £1.3bn a year, forcing defences against this crime to evolve rapidly. In the past few years this has led to the emergence of smart card-based integrated authentication networks.

Identity security has developed beyond the simplest form of authentication where one party issues and verifies identities within a closed group of users. While easy to do, this approach is extremely hard and costly to scale upwards and offers no interoperability with other authentication networks.

As such, a more common technique being used widely today is the use of a federated identity network. This allows individuals to use one form of identity to authenticate themselves to a range of different organisations. As such, an individual could use one username/password, token/PIN, digital certificate/passcode issued by one organisation for authenticating themselves to a completely different organisation.

This approach solves many of the problems associated with the closed group identity security approach. For a start, the enormous investment involved in issuing digital certificates on smart cards, for example, can be recouped to some extent, by deriving revenue from allowing other organisations to authenticate their users with the same identity.

There are, however, significant challenges with this approach. Central to this is the level of trust that must be given by an organisation using another organisation’s authentication network. Essentially, an organisation that is joining another’s authentication network must have confidence in the checks that have been carried out to guarantee the identity of the user. Privacy laws have further compounded this as one organisation is unlikely to be able to share any meaningful information with another organisation to prove that these checks are robust. Therefore the ability to use a federated identity approach in a highly scalable environment is limited because of the levels of risk involved in relying upon the work of the issuing organisation.

It is for this reason that a new integrated identity approach has emerged in the last two to three years. In this approach the focus is on a single application being used at the hub of the authentication network which allows all participating organisations to be issuers.

The key lies in the use of an authentication platform that is flexible enough to accept the digital credentials of any participating organisation. An additional advantage of the integrated approach is that it need not err towards the lowest common denominator digital identity solution – i.e. username/password. Therefore, should an organisation within the integrated identity group want to be able to use stronger identity for some, if not all, of its transactions then this is possible without interfering with the requirements of other participants. As such, one organisation may consistently have high transaction values that would justify and require a more robust authentication solution than lower value transactions would. This is based upon a financial risk versus cost of solution basis but does allow for the widespread use of a single smart card-based solution.

As the digital identity market evolves, we will of course see many examples of both issuer-centric federated identity and application-centric integrated identity networks developing. The federated identity model is best suited to small communities with rich, intensive interactions, and with simple risk management requirements. The integrated identity model provides a new perspective on identity management for large application owners, and significantly simplifies the deployment and management of applications which span communities, require a tiered authentication and risk model or raise significant privacy issues.

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