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E-Commerce Merchants Guard Against Online Theft

[November 21] Internet merchants increasingly are taking steps to guard against the use of stolen or counterfeit credit card numbers, a type of crime that, unchecked, could stifle the growth of Internet commerce, according to a New York Times report.

To date, software has been a favorite target of Internet thieves because its instant electronic delivery capabilities makes it easier to steal.

"We had a week in which we had more fraud than legitimate sales," William McKiernan, the chief executive of CyberSource, which runs the online retail store Software.Net, was quoted as saying. "We were literally going out of business."

At Buynow.Com, a similar site offered by CNET, the fraud rate reportedly hit 20% of sales earlier this year.

"If you have to mail something to someone, you can catch the fraud before you send the product," said Suzanne Bray, manager of electronic commerce business development at Symantec. "With electronic software distribution, they get the product immediately."

While consumers are generally limited to a liability of $50 for someone else's fraudulent use of their card number, credit card companies usually hold merchants fully responsible for any fraudulent purchases made when the signature on the card cannot be verified, the Times said.

CyberSource has turned its trauma into a second business line, a fraud clearinghouse for online merchants, in which services include comparing a credit card sales request against a list of about 75,000 known online crooks.

The company has a computer model that looks at 150 factors to calculate the risk of fraud in a purchase. For 50 cents a transaction, other cyber merchants can pay CyberSource to run a pending credit card request through this online model. Or, for the same fee, CyberSource will compare the request against its 75,000-name fraud database.

CyberSource said its own fraud losses have fallen to less than 1% of sales.