More About Early Warning Services, LLC

Carol reports:

The formation of Early Warning Services spun out the fraud prevention assets of First Data's PPS and IDLogix subsidiaries. The new owners are First Data, Bank of America, BB&T Corporation, JPMorgan Chase, Wachovia, and Wells Fargo.

In some respects, this is a "back to the future" move: PPS was formerly owned by banks. The new structure returns to bank control and ownership key data assets, most notably the checking account status database used by the entire industry. Although only some of the major banks have equity stakes in EWS, all banks will continue to be customers of the company: owner banks will have no additional special privileges.

Bank ownership and control will help manage bankers' concerns about the always troublesome issue of data sharing: Historically, banks have been torn between the evident benefits of sharing for fraud control, and the danger of helping competitors open new accounts.

In our opinion, the "$64 million question" is whether or not Early Warning Services will be able to enhance its account status database with the account holder's name. Doing this (which would be quite straightforward, technically) could create a unique and powerful asset. A merchant or biller accepter of an ACH eCheck, for example, could easily query such a database to confirm that their customer was legitimately associated with the account number provided. A new creditor, similarly, could confirm that their applicant had an account at a referenced financial institution.

All of these potential products and services are fraught with competitive and political complexity – but have a fascinating potential for the industry. Early Warning isn't saying anything about new product plans, other than to reiterate that the new ownership structure (as well as the ongoing, more broadly based advisory group structure) will help in collaborative efforts.

Stay tuned!