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May 29, 2012
Are social security numbers still secure enough for payments?
Identity authentication is becoming increasingly important today as consumers conduct more and more social interactions, commerce, and financial transactions online. Many emerging payment methods are conducted electronically today and will no longer involve the face-to-face interactions that have provided an additional layer of security for our traditional retail payments environment. Unfortunately, our primary means of personal identification is the social security number, and it is becoming more vulnerable to compromise. How do we mitigate the risks in innovative payments going forward with traditional identification methods?
A well-intended system
The social security number was created in 1936 as a way to track workers' benefits for the new pension program. At the time, no other use for the number was envisioned. In 1943, however, President Roosevelt signed an executive order allowing other government agencies to use social security numbers. Today, the numbers are the primary identifiers for many government functions, including filing taxes, receiving all manner of benefits, and enlisting in the military. Social security numbers are also widely used in the private sector, especially in the healthcare and financial industries. They have become the default identifier used by healthcare providers, insurers, credit bureaus, banks, and others when signing up new customers.
Social security numbers—not so secure
You probably believe that your social security number is private. You probably assume that it's kept private by those who use it to verify your identity. But how many different people have seen your number, or some part of it, in the past decade? It's out there every time you've gone to a new healthcare provider, signed up for a new insurance plan, or applied for a credit card, bank account, or cell phone plan. Researchers have even developed an algorithm for guessing a person's number using just their place and date of birth.
The problem with such widespread use of social security numbers is that they are easily exposed and vulnerable to use in identity theft and related crimes, including various types of payment fraud. It goes without saying that new identification and authentication methods will be needed in the future to ensure that the personal information accessible via social security numbers can be protected and kept secure.
Mitigating compromise and improving personal authentication
In 2008, the Federal Trade Commission (FTC) developed recommendations on preventing the misuse of social security numbers for identity theft. First, they recommend using multifactor authentication, including additional processes in addition to the social security number. The FTC recommends further that, whenever possible, users should restrict the public display and transmission of social security numbers from applications, identity cards, and other documents. As crimes in electronic networks grow more prevalent, it will be increasingly important that the industry use multifactor authentication practices to combat the threat of outmoded personal identification methods.
By Jennifer C. Windh, a senior payments risk analyst in the Retail Payments Risk Forum at the Atlanta Fed
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