Online fraud losses continue to mount, new protections gain popularity

<p>STAMFORD, Conn. - The Internet is a popular place to do business, for good or ill, according to a study that shows that online fraud losses in 2001 were 19 times that of offline sales. But the study by GartnerG2, a business strategy research service of Gartner Inc., also shows that consumers are increasingly embracing new technologies for protecting their credit card information. Gartner says that more than $700 million in online sales were lost to fraud in 2001, representing 1.14% of total annual online sales of $61.8 billion. A survey the firm conducted in January found that 5.2% of respondents were victimized by credit card fraud and 1.9% by identity theft. On a positive note, more than 18% of respondents said they were using two new protection systems: VISA's Verified by VISA and MasterCard's universal cardholder authentification field (UCAF) standard and secure payment application (SPA). Avivah Litan, GartnerG2's research director, said the password-based systems are easier to use than other solutions such as smart cards and public-key infrastructures (PKI), but that the next step for even more widespread adoption is up to the credit card issuers themselves. Merchants need to adopt the technologies, too, and would be encouraged to do so by seeing a reduction in the fees they're charged by the issuers, which are higher online than in stores. VISA and MasterCard, however, are moving toward making the card-issuers rather than the merchants liable for losses if the new protections were in place. "Consumers are interested in using these new security systems, which can significantly reduce online fraud," Litan said. "The credit card companies should back up their belief in these systems by lowering fees for all merchants who adopt them. "This would guarantee even more widespread adoption," she said. -mrapport@sc.rr.com</p>