Anti-fraud systems deemed essential to online strategy

Report says anti-fraud technology can boost customer satisfaction

Online businesses must regard anti-fraud technology as an integral part of their operations rather than just a precautionary measure, according to research.

The second annual UK Online Fraud Report from CyberSource says that anti-fraud technology such as Verified by Visa and MasterCard’s SecureCode can improve efficiency and customer satisfaction, and reduce the risk of online fraud by authenticating the buyer’s identity.

But just 20 per cent of online businesses plan to implement these systems over the next year.

And 34 per cent of the companies surveyed have no plans to introduce new anti-fraud measures in 2006, even though 95 per cent said they expect to see a rise in online sales, with 23 per cent predicting increases of more than 50 per cent.

For the majority of organisations, fraud decreased as a proportion of overall transactions in 2005, but the report warns of a rise in the number of cases as fraudsters hone their skills.

‘I think things are going to get worse,’ said Martha Bennett, research director at Forrester Research’s European financial services group.

‘Merchants are losing business by making it too difficult to do business online because of fraud concerns. For example, many companies will no longer deliver to business addresses.’

The increasing use of chip-and-PIN transactions was seen as a large threat by 20 per cent of businesses because it drives fraud online.

Some 39 per cent were worried by a perceived increase in the sophistication of fraudsters and 35 per cent by higher incidents of identity theft.

But there is still a reticence among businesses to install new software, partly because of concerns about the security of new products.

‘Verified by Visa and MasterCard SecureCode do add an extra element of security, but the sign-up process in itself is a potential phishing target,’ said Bennett.

‘They want to make it as easy as possible to sign up, but this procedure needs to be changed so it is more secure. They need to get away from using static passwords and use a one-time password system.’