Growing credit card fraud over the Internet will affect the future of e-commerce to the extent that some analysts say if it’s not kept in check — people will simply stop making purchases online.
Some Web merchants already say that more than half of the sales they make on software and digital music downloads are fraudulent — especially in a world where stealing someone’s identity can be easier than stealing their car.
So does this mean e-commerce is about to be snuffed out before it even has a chance to flourish? No. Fortunately, there are several software companies that have already developed “smart software” that can track a credit card’s activity then calculate the probability of the transaction being fraudulent.
Technology Reducing Online Theft
HNC Software, Inc. of San Diego, California is one such company. It currently keeps tabs on the transactions of more than 260 million credit-card accounts in order to spot fraudulent transactions. It also says its software is responsible for saving credit card issuers more than $250 million (US$).
The company announced May 10th, that it had launched a complete, real-time Internet fraud detection service for Internet merchants and their service providers.
“Fraudulent transactions may exceed 10 percent of e-commerce revenues in some cases, ” said Robert North, HNC president and CEO. “With consumers expected to spend approximately $16 billion online next year, that’s a huge problem for Internet merchants.”
In order to participate, Internet merchants supply HNC with information on their cardholders — including the kind of products they purchase. This enables HNC to build accurate profiles, which are used to determine whether a purchase that’s made is out of character — therefore fraudulent.
If HNC’s balance sheet is any indication of the future of such tracking software, then it’s here to stay. Last year, the company generated $10.5 million of earnings on revenue of $178 million.
Nevertheless, civil libertarians howl at the prospect of such Internet merchants sharing information about customers with companies such as HNC. They say it proves that “Big Brother” is here and privacy just got a stake driven through its heart.
But company officials say that HNC’s agreement with Internet merchants prohibits it from using the data for cross marketing. In addition, proponents of e-commerce claim that without these measures, hackers can easily generate a stream of phony credit cards and get away with making fraudulent purchases all day long.
As always, the issue seems to boil down to this: is security worth the lost of privacy?
What do you think? Let’s talk about it.