On-line fraud losses for 2001 were 19 times as high, dollar for
dollar, as fraud losses resulting from off-line sales. GartnerG2’s
survey showed that adult consumers in the US are beginning to adopt
credit card company solutions designed to protect against online
fraud.
Its on-line survey of more than 1,000 adult US on-line
consumers, conducted in January 2002, showed that 5.2% of
respondents were victims of credit card fraud in 2001 and 1.9% were
victims of identity theft (although respondents do not know whether
the theft occurred on-line or off-line).
Security systems
More than 18% of respondents are using two new credit card
protection systems: Visa's Verified by Visa and MasterCard's
Universal Cardholder Authentication Field (UCAF) standard and
Secure Payment Application (SPA).
“After years of missteps, the credit card companies have finally
got it right with their consumer authentication technology.
Consumers are willing to adopt the easy-to-use password-based
applications,” said Avivah Litan, Research Director for
GartnerG2.
Litan continued:
“Other security schemes, including public
key infrastructure (PKI), smart cards (that the credit card firms
also support) and disposable card numbers, receive far less
consumer support,” Litan said. “Most consumers are unwilling to
take the extra steps required to use PKI, as the failure of the
previous MasterCard/VISA sponsored PKI-based Secure Electronic
Transactions (SET) standard clearly demonstrated. Consumers also
believe the new Visa and MasterCard systems offer better protection
than PKI or smart cards, showing that branding is far more
important than technically robust security schemes.”
The credit card companies are, however, not yet willing to take
the next major step: inciting merchant adoption by universally
lowering merchant fees.
MasterCard does plan to partially incite US merchants by making
issuers, rather than merchants, liable for UCAF-protected
transactions beginning in November 2002. Visa plans a similar shift
in liability rules in mid-2003. US merchants will, however,
continue to pay higher fees for internet transactions, which
average approximately 2.5% compared to 1.5% for in-store sales.
“Consumers are interested in using these new security systems,
which can significantly reduce on-line fraud. The credit card
companies should, however, back up their belief in these systems by
lowering fees for all merchants who support them,” Litan said.
“This would guarantee even more widespread adoption.”
