Safety-Zones^®

Providing the Ways to Information & Identity Theft Protection*

Goals

Considering the Alternatives

         We all know intuitively that given the escalating losses and damages from information and identity theft that some form of identity theft protection is coming; it's just a matter of time. We say this hoping that the tens of thousands of thieves that don't get caught and are put out of work when Safety-Zones is implemented, find meaningful and honorable work doing something else.

We know that we in the USA are not the only country with this problem, so we mean no disrespect or intend no favoritism by starting our analysis with a model for implementation in the USA. We do this simple because we live here and therefore think we understand how its internal processes work better than we understand how they work anywhere else. We expect, however, that the concepts and arguments presented here apply somewhat universally, and because the Safety-Zones process uses existing networks and all the current encryption protocols, and easily converts for use in other languages.

We know this is a very serious subject and that some of you will either be current or previous victims of identity theft. But because we think this is important for you to read we thought we might lighten up a few parts keeping with our goal of trying to create a pleasant reading experience regardless of the subject.

Goals for Service; the USA Model

         Go away you fools and stop bothering us!  But Sir, we really do have a magic bullet!  Just try it and see for yourself!

This has not happened, ever! We are just making the point that we cannot implement Safety-Zones. It must be adopted by each group or sector of the economy because it would be an add-on to existing systems. We hope therefore that the business community receives it favorably, although we recognize that licensing is not likely until a patent is issued. Nevertheless, since (in our opinion) it is a great process for stopping identity and information theft we feel that the business community should start their own design, development and implementation processes now so it can be used as quickly as is possible. The important points to consider are that it is a great process regardless of whether a patent is issued, the need is now, and it will take time to implement.

An economic incentive for the business community is recognize that it will not only stop the high level of growing losses (and end the aggravations associated with this distracting problem¹) but to imagine the new ways that products can be created and or improved as this new industry takes form, and to recognize that profits are possible from these changes. It should also be recognized that once a good method of providing protection is employed, and interest rates drop accordingly, it's likely that many people will prefer to carry less cash and participate more in the credit card world of transactions, as they begin to trust the Internet world of e-commerce more. The concept of a model follows.

Note 1: Identity theft causes many corporate problems beyond the alarming raw data, as it also requires consumer goods companies to pay for the added costs associated with every corporate function (from the need to increase order sizes, to paying for the incrementally higher transportation charges, to accounting for the losses, and much more) while still trying to have competitive prices. These losses therefore, in many cases, directly effect profitability.

We offer this model because we know that there will be those who will say things like: Okay. You created it. Now, how do you expect us to pay for it? And how would we go about implementing it? So we are delighted to cut through the fog of uncertainty to give us all a place from which to begin.

Safety-Zones as a Consumer Product

Pricing the Model

       Pricing what? You said consumers and the corporate world should save over 90% of the current losses due to identity theft, or over $45 billion per year using Safety-Zones, and you're talking about pricing the model?

Yes. We think that you might want to pay for the service after you read this analysis.

When credit card companies experience losses themselves (by the bad guys and the people in financial trouble) they just pass them on to us in higher charges² (to the good guys and the people not in financial trouble). However, the majority of the $45 billion not lost from identity theft when using Safety-Zones would be spread among many consumers and many retail businesses while the majority of the costs to implement and maintain the process (estimated below at $7.2 billion/year) can only be carried by a very few electronic transaction and software provider companies.

Note 2: From recent advertising we learn that credit card companies now try to alleviate our fears about identity theft so we will continue using their credit cards, the ongoing source of their revenue. They do this by claiming to have various forms of identity theft protection or solutions. What they really mean is that they won't hold you accountable for losses to your account. They do this by just passing on these losses to the rest of us in higher charges! So their current 'solutions' are what they offered previously with a new identity theft twist. We are not aware of these companies actually offering you anything that really protects you from identity theft - we would be pleased to update this page with information provided by credit card companies that helps us to understand the identity theft protections they actually provided.

The current method used to pay for each transaction in the electronic transaction world, which includes B&M (Brick & Mortar) and e-commerce (Internet), without the cost of identity theft protection, is to add transaction fees that are hidden in the credit card fees (or interest rate charges) that are paid to the transaction providers. So if the transaction provider companies and the credit card companies decide that it's practical to add an additional fee to each transaction to provide for a process like Safety-Zones, and we accept this, then there will be no direct cost to the consumer. But to assume that this is likely, or best, please read on.

(A survey of possible costs and implementation methods is provided at the bottom of this page.)

Understanding the Overall Problem Using a few Statistics

       Let's start with a question: Who among our population really needs identity theft protection? Analysis: Everyone with a social security number is at risk. So the answer is, everyone with a social security number.

How many people is that? Considering that all US citizens are now required to have a social security number within a few months of birth, and that there are many people from other countries who also have US social security numbers, we simple use the latest statistic from the Social Security Administration, which says there are about 301 million people with social security numbers.

Considering economy of scale, we estimate (by secret methods known only to us and the Great Wizard) that the costs to implement³ and maintain the Safety-Zones process⁴ to be about $2/person/month or $24/person/year^5.

If this is so, the population of 301 million people that needs identity theft protection represents an industry with revenue of $7,224 million (301 million x $24/year) or $7.224 billion/year to meet these needs. But the $7.2 billion only cover the basic process; it does not cover all the peripheral enhancements that are likely.

With the current losses estimated at $50 billion and growing at a rate of 40%/year⁶, this means one year from now the losses will be about $70 billion, and still growing. The first costs to implement identity theft protection will be 10.32% of total annual losses (7.224/70), and the number of people injured by the identity theft problem will grow from 30 million to-date overall to tens of millions/year⁷. And if it takes more than one year to install an identity theft protection process the relative costs will be lower, and the damages will be higher as will the number of people injured.

Note 3: These basic costs include the following: (If not included in the $2/person/month we use an asterisk*)

a) *New hardware at the terminal, user or retail end of a transaction (displays and keypads), and perhaps new software that retailers would purchase or pay a fee to use to serve customers using the improved process;

b) *New digital wallet software in computer browsers for you to use that might or might not be provided free;

c) New verification and transaction software and dedicated hardware at the commercial end of any transaction to process a Safety-Zones transaction;

d) New forms of collecting transaction history information and perhaps hardware to serve this need;

e) *New software in PDA communications protocols;

f) New software in many platforms to monitor the process from a security and quality control standpoint;

g) Patent royalty fees.

Note 4: The process is explained on the About page and the functions are explained in detail on the Details page.

Note 5: We expect that others will estimate higher and lower costs based on their own analysis, but for this analysis the numbers are a good starting point. These costs include the development of the process to protect you from identity theft; a proof of identity process so thieves cannot get use of accounts that belong to others; transaction history information and traceability; security, quality control, subscription fee collection and distribution, patent royalty fee payment; and methods to catch thieves when they try to use accounts belonging to others.

Note 6: Federal Trade Commission

Note 7: Simple extrapolation from data reported by the Federal Trade Commission

Comparing the Payment Methods

       Said again: The current method used to pay for each transaction in the electronic transaction world, which includes B&M (Brick & Mortar) and e-commerce (Internet), without the cost of identity theft protection, is to add a small transaction fee that is hidden in the credit card fees that is shared by all transaction providers. So if the transaction provider companies decide that it's practical to add an additional fee to each transaction to provide for a process like Safety-Zones, and if we agree to this, then there will be no direct cost to the consumer.

But, do you understand the problem here?

The system as designed now is very fair - you buy something with a credit card so you create the need for an electronic transaction and you pay for it. However, we need a method to pay for identity theft protection for everyone, and many people don't participate in electronic transactions! The problem is that adding a fee for each credit card transaction is not like charging $24/person/year; adding a fee for each credit card transaction is like making a select group of people pay to implement and maintain a system that costs the same for each person, whether or not they participate in the world of electronic transactions, or use it once or use it a 1000 times a year!

If you think that you don't mind paying someone else's $24/year, think again. Since we estimate that about one third of the population over 18 either makes very few transactions or none at all⁸, and all the children below 18 make no transactions, we have only about 117.7 million ((301 x 2/3) - 83⁹) people paying for all 301 million people who need it. So now, if you are part of the 117.7 million active retail users participating in the electronic world you are paying $61.38/year (7,224/117.7) for something that on average should cost you only $24/year. Is giving low volume or no volume users a free ride what you want? And when asked who else we might consider, we translate that the Great Wizard said, What about those who only make a few high-priced purchases each year and then pay cash for everything else? Shouldn't they have to pay a fair share?

Note 8: These people include those who live at home and have little or no additional needs to pay for with credit cards, those who pay cash, the retired with little or no need for credit cards, those that are at or over their credit limit, and those that already have what they want.

Note 9: From Social Security Administration statistics, the estimate of the population below age 18 is 83 million.

We suppose that some argument could be made that goes like this, 'You pay for it this year and I'll pay for it next year', as needs change and different people are creating the most transactions to pay the fees. And we assume that some people will drop out of the transaction population as their homes fill to the top with stuff from eBay, while others will enter it as they want the stuff too. But we are not sure if these are sufficiently good arguments given the exceptions provided⁸. We think instead that, although the transaction population will change slowly over time, in general most of the costs will be paid for by most of the same population, probably because they have bigger houses, better storage methods, or they keep selling and buying stuff (on eBay).

An argument could also be made that many of the non-participants are too young to use the credit cards they might have accidentally received, and the older generation has already retired and burned theirs (credit cards), or have forgotten where they put them. So why don't we just pay for them out of the transaction pool? To some this will be a valid argument; to others it won't be.

Unfortunately, we think there is still another charge that only makes sense to us (and the Great Wizard) to discuss separately now: As soon as we say 'charge a fee', whether it's an average fee or a hidden transaction fee, we probably need to add about 50% because of all the needed collection, management and overhead expenses for this new and different process. So the average cost per 301 million consumers would now be about ($24 x 1.5 or $24 + $12 =) $36/year. If you are part of the 117.7 million retail transaction payers, this means your transaction costs will now be raised from $61.38/year to $73.38 per year ($61.38 + $12¹⁰).

Note: 10: The collection fee would remain the same.

The size of this annual fee ($73.38/year) is probably a problem now because it's too big too hide - it's big enough to show as a line item on your retail credit card transaction payment. So now, is $73.38 a 10% portion of the $734 you spend each year using your credit card? Or is it 1% of the $7,340 you spend? We don't know how many transactions are made by US consumers (businesses and their transactions are discussed later), or how many would be necessary to pay for the process^11.

Note 11: To set the size of the transaction fee the transaction providers would simply divide $7.224 billion by the estimated total number of all credit card transactions/year. For example, if the 117.7 million active retail users use their credit cards on average once/week that would be (117.7 million x 52 =) 6.1204 billion transactions/year (of unknown value*). And the average fee per transaction to pay for identity theft protection would be ($7.224/6.1204=) $1.18, but 52 x $1.18 is only $61.36. So we need about 62 ($73.38/$1.18) transactions per average person or we need to increase the rate per transaction to (73.38/52 =) $1.41, which is still only ($73.38/365 =) 20 cents a day.

[*The following analysis is to prove that what we are saying is reasonable: We have no idea how many credit card transactions are actually made. But if the average transaction were $50, then the revenue changing hands in all retail sales (Internet and B&M) due to credit card transactions would be $306.2 billion/year (6.1204 billion x $50). And these numbers are consistent with total US retail sales reported as follows:

The US Department of Commerce reports (November 2003): "The Census Bureau of the Department of Commerce announced today that the estimate of US retail e-commerce [Internet only] sales for the third quarter of 2003, not adjusted for seasonal, holiday, and trading-day differences, was $13.291 billion, an increase of 27.0 percent (�4.2%) from the third quarter of 2002. Total retail sales for the third quarter of 2003 [all B&M and e-commerce combined] were estimated at $872.5 billion, an increase of 6.1 percent (�0.3%) from the same period a year ago." The first quarter for e-commerce was about $12 billion and the second quarter for e-commerce was about $12.5 billion. This would give us approximately $50 billion in annual e-commerce sales, which for all practical purposes is all from credit cards.

What this says, in effect, is that the total sales from all transactions (credit cards and cash/checks in both B&M and e-commerce (Internet)) is $872.5 billion for 3 quarters. And we are crudely estimating that the total credit card transactions per year are about $306 billion. These are not unreasonable numbers given the lack of data. And e-commerce (the Internet) currently represents about 16% (50/306) of the total credit card transactions.]

Recognizing that the world has changed significantly since the widespread use of the Internet, we also suppose that the government could say that, now that there is a method to stop identity theft and we know how much it might cost, identity theft protection should be nationalized and paid for out of the US treasury, or collected as a flat-rate fee at tax time, one for each social security number shown.

The bigger problem, if the government is involved, is the selection of identity theft protection provider companies, the government costs to manage them, and the time it takes the government to do anything. Given that the government has not shown itself to be an effective and efficient manager we are not sure that this would work well. Here we are concerned with over-regulation and books full of rules, a budget that gets wasted, and the establishment of bidding rules that (because of laws gone wild so as not to offend anyone) could allow companies to bid that shouldn't be involved, like new IT (Internet Technology) companies with no offices, no IT people, and cars with trunks full of worn-out credit cards, and so forth. A department like the postal service should also not be created for similar and bureaucratic reasons. Perhaps a respectable private sector high technology company (that is not directly involved in creating IT) could be charged with the responsibility to manage the identity theft protection process, including approving payments of work done through performance-proven private sector contracts.

Another collection method might be to have the credit card provider companies collect the fee, but this gets us right back to the problem of only the users paying for the service, and if you have more than one credit card you could be required to pay about $73/year for each one!

Conclusion

There are 5 possible methods presented here to pay for implementing and maintaining Safety-Zones, and these methods could be applied to any universal identity theft protection process:

1) A hidden (or perhaps not so hidden) transaction fee of about $73/person/year paid for by less than half the population, paid at the rate of $0.50 to $1.50/transaction;

2) A flat rate fee of about $36/person/year, with an undetermined collection method;

3) The cost of about $36/person/year paid for out of the US treasury (about $7.2 billion/year);

4) A flat rate fee of about $36/person/year, collected by the government at tax time for each social security number shown;

5) A flat rate fee of about $73/year for each credit card, collected by the credit card companies.

We think the best method is to collect a flat rate fee, using either method 2 or 4. By our estimates this fee would be about $36/person/year for everyone (each person with a social security number), which includes collecting fees from the approximate 10 million people who are not US citizens.

Considering what this $36/year pays for, and that credit reporting agencies are successfully selling one credit report for about $10, and a subscription to a credit reporting service, like Equifax costs from $4.95/month (nearly $60/year) to $9.95/month (nearly $120/year), we ask you, is 10 cents a day ($36/365) for identity theft protection a bargain? We think so. We realize that families with children will have to pay more because they have more to protect, but the rate is still very low.

Because the transaction fee of $73.38/person/year is still small and perhaps hidden you might still be leaning toward just using it to collect the funds - just do it and don't tell me anymore about it. But please consider that there is another reason why you might want to pay for the service; the reason is related to issues of equal participation and of wanting to be involved. When you do not actually pay for a service it's very hard to get the provider to respond to your concerns, complaints or suggestions; whatever they may be. Identity theft protection is very important to each of us. Is it worth paying this small fee just so that we always have a voice in this critical service? We think so. And we think an advisory board, comprised of members from all groups¹², should oversee whichever identity theft protection process is finally implemented, acting as a board of directors. (To be sure, transaction providers are not likely to volunteer to pay for this need out of their fees.)

Note 12: These group members should include: Business - users, business - identity theft protection providers, State governments, the Federal government in general, the Social Security Administration in particular, credit card institutions, credit report providers, the national head of the Chiefs of Police, and those selected to represent individually, children, adults, seniors, the deceased, people with no credit cards, etc.

A Possible Solution to the Fee Collection Problem

       We have a few more thoughts that might help to solve the unresolved fee collection problem (listed as item 2 above): Since we have suggested, under Proof of Identity that each person wanting to open an identity theft protection account, would bring the information to the local police department, have their fingerprints taken and pay an 'authentication' and setup fee for the service, why don't we double the collection fee to cover their costs, to a new total of $48/person ($24 + $12 + $12), then ask the police departments if they would collect the entire fee, keep half ($24/person) for authentication, setup and collection, then place the other half (when it's not paid for by an online credit card transaction) into a bank account used for revenue collection? An alternate location to provide the authentication, setup and collection could be State controlled and operated registry of motor vehicle locations (DMVs), because what they do is very similar to the need.

This solves the first year collection problem. Thereafter the government could collect $36/person/year at tax time, or the DMVs could continue to collect the fees by an acceptable method.

A side benefit to having the police departments do the setup and authentication to register each of us is that they would already have the computers and Internet means to deal with identity theft when it's either discovered or reported to them. Although we suppose that registry officers could be charged with this added responsibility. An argument that suggests that all this processing and collection will cost States more is not a good one because they have not even begun to pursue the identity theft problem and they will need to eventually, at their own costs.

Summary

       Along with presenting several arguments and choosing among them, under Goals for Service we said that we would answer two main questions:

a) Okay. You created it. Now, how do you expect us to pay it? Answer: We offered that it should be a subscription service with a flat rate fee for everyone of about $36/year paid for as described. The final choice of payment methods would be made by a board of directors that is influenced by this survey if we have good participation in it.

b) And how would we go about implementing it? Considering the above, we feel that if the major corporations involved don't just agree to use Safety-Zones then the Federal Trade Commission or the office of Homeland Security should be charged by Congress with setting up an organization with a board of directors that would select and hire a company to implement and manage the process.

We said that the process would even be useful for protecting those that don't use credit cards, then we explained how any account opened in the name of someone without a credit card would be locked out ahead of time if the person subscribes or is subscribed to the service.

We said that businesses could also use Safety-Zones in or between their VPNs (Virtual Private Networks) or that it could also support VPN's to insure proper safeguards are being used, and we hope that we have demonstrated this within the basic process by the simple substitution of destination codes and ID's where appropriate.

We said that with slight variation the process could also be used for transferring or approving the transfer of private information like medical records, credit reports, drivers licenses, etc. between parties over the Internet, and we suggest that by substituting accounts for credit cards numbers and using destination codes and ID's the process works to do this.

And as described on the Safety-Zones About page we said that it would be free of royalty fees for voting purposes.

Survey

How should we pay for any good method of identity theft protection? (All fees are estimated.)
.		.	%	.	%	.	%	.	%	.	%
.		Method 1		Method 2		Method 3		Method 4		Method 5
Payment  Method		fee/transaction of $0.50 to $1.50		$36 Flat rate fee using police or DMV		Paid from the US Treasury		$36/SS# at Tax time		$73/credit card
.		Choose Me!		No! Choose Me!		No! I'm Better!		No! Choose Me!		No! I'm Better!
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