Identity theft has probably been around since the invention of money, but the increasing importance of credit to American consumers has added an even more complex dimension.
Technological advances such as e-mail, computer-based and online financial services, wireless communications and electronic fund transfers have increased the speed and ease with which we can provide and receive goods and services. But these advances also have increased the opportunities for the unscrupulous to commit fraud on a grand scale. So, while the percentage of the population affected by identity theft remains low, cleaning up the mess left by a “fraudster” is time-consuming and frustrating.
Both merchants and consumers are the victims of credit card fraud and identity theft. Merchants get hit with charge-backs, and if those rise above a certain monthly or annual threshold, many credit card issuers will charge the merchant an additional penalty. Online credit card fraud is estimated at 10 percent of transactions, and Meridien Research, Newton, MA, estimates this number will climb to at least 14 percent by 2003. And this number is just an average. Merchants in some industries are experiencing even higher losses.
The best way for merchants to fight online fraud is to implement a system that authenticates customers. This helps protect merchants against criminals who might go online and pretend to be someone else. There are many different levels of authentication, and it is important to choose one that fits best with your business needs.
To determine more about your organization's authentication needs, here are some key questions to answer:
Does an authentication system make sense for your site? The level of authentication you need is based on the value of your products and the method by which your transactions occur. For example, an online book site will need to verify the basics such as address and credit card number, while an online banking site will need a much higher level of security to ensure that money decisions are being made by the correct owner of the account. A site offering age-restricted content will require a different level of authentication from one offering access to highly sensitive data, such as personal medical information.
How secure is the system? It is important to ensure that your system is protected with sufficient types and layers of security so unauthorized individuals cannot get into the site and find ways around the authentication. Talk with your authentication supplier about different options for protection and security.
How protected are the customer data? The line between privacy and security is thin. Though consumers want to give some personal information to take advantage of the ease and convenience of completing a transaction online, they also are concerned about releasing that information to a site. Be sure to explain clearly on the site that the information is used for authentication purposes only, and indicate whether their information is stored on the site and whether it may be sold to other businesses.
Are the data reliable? Having the most up-to-date information about your consumers is crucial in authentication. This is why using a service that employs data from one of the national credit reporting agencies is smart. Their data are reliable, secure and updated regularly. You can contact any of the three major credit reporting agencies to find out about their authentication offerings.
How quick is the process? Is it built into the transaction, or must customers go to a separate site for completion? Keep in mind the customer experience when incorporating authentication into your site. You want to ensure that the process is relatively simple and as accurate as possible so consumers will realize the benefits and not view it as a burden that deters them from returning to your site.
Can you get consultative help from your supplier? Find out from your authentication supplier about the extent of its service. It will help you decide what type of system fits your needs best and how initially to implement it. You also may need help down the line with upgrades and maintenance, as well as varied expansion options if your business grows or changes.
Once you have answered these questions, you can begin selecting and implementing an authentication system that will protect you and your customers. Taking the steps now to build authentication into your business site can help lower costs associated with fraudulent transactions in the future.
Merchants and consumers alike should be aware of the risks of identity theft and credit card fraud and should use caution to avoid becoming victims. Merchants should consider an authentication system to help deter credit “fraudsters.” As long as money exists, so will theft. Take the time now to begin safeguarding yourself so you do not become an unhappy statistic.
