Is it getting unsafe to conduct business online? There is apprehension that it may be so. The ninth annual CyberSource survey on e-commerce fraud has raised certain issues.

A few facts first. Only a couple of years ago, over 176,000 complaints were lodged with the Federal Trade Commission (FTC) relating to internet fraud, marking an increase of 16,000 over the previous two years. Over $590 million was paid by consumers reporting internet fraud, with the average amount being $3,338 and the median amount being $500, again marking a rise of $158 per incident. Credit card was the most common method of payment reported for internet related fraud complaints during this time at 35 per cent, followed by wire transfer, 22 per cent, and bank account debit, 18 per cent. Wire transfer has been showing a substantial increase throughout this period and even after that.

The study found that the initial method of contact from the fraudster was email. The top 10 fraud complaint categories (internet and non-internet) are: identity theft, shop-at-home/catalog sales, prizes/sweepstakes and lotteries, Internet services and computer complaints, internet auctions, foreign money offers, advance-fee loans and credit protection/repair, magazines and buyers clubs, telephone services and healthcare.

It is hard to say whether the rise in online fraud has been real or it is just the number of people lodging complaints. But there indeed is a need to take necessary precautions and arrest this trend. According to CyberSource study, merchants are already working aggressively on this. Their various online security products and related best practices are keeping the fraud rate stable. Still, it requires much more resources.

“E-frauds are impeding the growth of e-commerce, a second level authentication mechanism deployed by e-commerce providers can significantly reduce the incidents, providing end users to transact securely in cyberspace,” Sanjay Padode, CEO, Religare Technova, told Financial Chronicle. Religare Technova has gone for a strategic alliance with the US-based Akros TechLabs to act as a value-added reseller of CNBSignIn from the Akros’ stable, a two factor authentication product in the Indian, US, European, west Asia and Asia Pacific markets.

Partha Das Chowdhury, a post doctoral scholar from Cambridge University, who runs his own company-eMotions Infomedia, however, has a different view point. “People who bombed the twin towers passed many levels of authentication at US immigration and flew business class and had loads of money. So having multiple authentication is not an answer but may be a problem by itself,” he said.

“To be honest, people always try to solve problems of the virtual world within the confines of the virtual world without being inspired by many solutions which exist in the real world. For example, the paper based banking system is more secure than online banking,” added Das Chowdhury.

CNBSignIn, which Religare Technova and Akros TechLabs are bringing in, is a patent-pending, software based two factor authentication solution, as opposed to the hardware based solutions available in the market. It uses a non-time based synchronisation algorithm and is built using the latest advanced encryption standard (AES). A software based two-factor authentication solution does not require dongles or hard tokens and the customers of banks, capital market companies, and other institutions can secure their online accounts just by using their mobiles. The companies now get the benefit of easy administration of this service by doing away with the hassles of maintaining and shipping hardware based dongles and hard tokens to their customer base. Another added advantage of this solution is that it easily integrates with the company’s base application and eliminates the need to host separate authentication servers and the costs associated with such infrastructure. And Sid Prasanna, managing director of Akros TechLabs is confident. “Our product being a software based solution is positioned uniquely as opposed to the other hard token based solutions that are currently available. Our solution will bring significant value to companies along with high level of cost savings,” Prasanna said.

Refering to the cost of e-frauds, Das Chowdhury said: “Apart from the obvious consequences of identity theft and theft of credit cards, companies are losing a lot in terms of lost customer as well. There is huge trust deficit among potential buyers.”

There are many Indian companies, including the IT biggies, who are working on this technology. The approach is to implement what one’s client thinks is right not what is realistic. It is not always that your bank will authenticate every transaction you do, it mostly depends on the value of the transaction as there is a cost to every time a request is routed from the merchant terminal to some server authenticating on behalf of Visa or Mastercard.

“E-frauds is a billion dollar industry now. For example I steal your card and go to Bhutan and shop...this fraud is prevalent in Europe and the thief in many cases may be some call centre staff in India. Identity theft is an equally big industry and its pretty easy for me to be you and buy as you,” Das Chowdhury said.

Little wonder that business owners are employing more anti-fraud tools. These include order velocity monitoring that detects suspicious purchase patterns, and IP geolocation, which can help pinpoint the physical point of origin of an internet order.