We're No. 1 -- In Identity Theft

First in war, first in peace and first in -- identity theft? That's the verdict on the United States, according to a report issued earlier this week by Aite Group, a Boston research firm. In fact, the report says, identity theft occurs seven times more often in the U.S. than in other industrialized regions, including the United Kingdom. (see http://wallstreetandtech.com/showArticle.jhtml?articleID=162600200)

So what's our problem? In a nutshell, it's the way we store our identities. As the report notes, most U.S. consumers -- online and otherwise -- are identified through credit cards and records stored via credit bureaus. Criminals have an incentive to collect our identity information, because it gives them access to our credit and bank accounts. This is not the case in Western Europe and Japan, where identity data is stored via a third-party entity -- and where identity theft is almost unknown, according to the Aite Group.

The recent exposures of private user data by Ameritrade, Bank of America and Time Warner, among others, would have had a much smaller impact if U.S. industry relied less on credit cards as a chief form of identification and more on independent, third-party verification methods that have no relationship to our credit or bank accounts.

Realistically, it would take years for such a transition to occur, especially because online commerce is so tuned to credit cards. But it's worth considering some intermediary method, such as escrow services, that would enable us to separate a user's identity from access to his money. Otherwise, we will continue to be number one in identity theft -- and that's a category we don't want to lead.