Internet fraud solutions are in the works

The problem of fraud on the Internet is a growing one as more and more Americans begin to do business online. While shopping or banking online were virtually unknown just a few years ago, many people now do most of their shopping, banking, and bill paying on the Internet. It’s convenient, fast, and doesn’t require stamps or worrying that the bill got lost in the mail.

On the downside, there is the problem of fraud. The process of “phishing”, where e-mail purporting to be from a bank or credit card company requests personal information, is a growing one. Some people receive dozens of such e-mail messages per day, each of them looking just like legitimate messages from some financial institution. Should the recipient respond to such a message, he or she would be redirected to a fake, but official looking, Website that exists only to steal such personal information as credit card numbers, usernames, passwords, and Social Security numbers. The result is often identity theft, where the information is used to steal money or make purchases in the victim’s name.

The prevalence of these messages has led to growing concern on the part of both banks and their customers. The customers are worried that their transactions aren’t secure or that they aren’t actually doing business with their bank when they appear to be. The bank are concerned because fraud costs them money and because in-person banking costs more than ten times as much as online banking, which is largely automated and requires fewer employees.

Banks are working on a number of solutions in order to try to stem the flow of cash into the hands of criminals. There are several possible solutions; some involve hardware and some involve software. The hardware solution involves providing each customer with a small device which displays a number. This number changes once a minute or so. When the customer logs in, he or she must type in the number that appears on the device, which may be the size of a credit card. The device and the Webserver both know the same number, and if they match, the customer is logged in to the site. Without the card, or without the correct number, the customer cannot log in.

Software solutions might include an application that must run on the customer’s computer or additional personal questions that must be answered by the customer before he or she can log in. The objective is to come up with a relatively easy way for the customer to log in while allowing the customer to feel safe while not feeling overburdened. It would be quite secure, for instance, to have a customer type in their last five employer’s names, but it would also be rather cumbersome and inconvenient. The trick is to find a solution that works while not being too difficult for the people who want to use it.

In the grand scheme of things, Internet commerce is very much in its infancy. In time, these issues will be worked out, but banks and online businesses will have to find a system that works well for everyone. If they don’t, people will eventually find themselves back in line at the bank, waiting to meet an actual teller.

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