From Stephen J. Dubner’s interview with Bruce Schneier in “Bruce Schneier Blazes Through Your Questions” (The New York Times: 4 December 2007):
Identity theft is a problem for two reasons. One, personal identifying information is incredibly easy to get; and two, personal identifying information is incredibly easy to use. Most of our security measures have tried to solve the first problem. Instead, we need to solve the second problem. As long as it’s easy to impersonate someone if you have his data, this sort of fraud will continue to be a major problem.
The basic answer is to stop relying on authenticating the person, and instead authenticate the transaction. Credit cards are a good example of this. Credit card companies spend almost no effort authenticating the person — hardly anyone checks your signature, and you can use your card over the phone, where they can’t even check if you’re holding the card — and spend all their effort authenticating the transaction.