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Money Talks – ID protection is key to further online sales growth

For consumers and retailers there is no escaping the issue of online identity fraud and the widespread concern that it continues to potentially peg back further growth in commerce over the internet. By Mark Chirnside

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Money Talks – ID protection is key to further online sales growth

For consumers and retailers there is no escaping the issue of online identity fraud and the widespread concern that it continues to potentially peg back further growth in commerce over the internet. By Mark Chirnside

The crux of the problem revolves around the requirement by providers of traditional forms of payment for consumers to share their personal data with financial institutions. This involves the major step of them passing on responsibility for the protection of their vitally important information to this third-party.

The effectiveness of this organisation to put in place exemplary protection of customers' financial and persona

l data is therefore absolutely paramount. The only problem is that it has been found to be rather lacking in many cases.

Take the recent research from consumer organisation Which? that found a catalogue of issues with even the largest and most-respected financial institutions. Their online banking services were found to be suffering from some serious weaknesses in respect of the security measures in place with the result that personal customer data is being put at great risk.

With big names like Abbey and Halifax named among the worst culprits, and HSBC and First Direct also found to have security flaws, it is no great surprise that there was a 130-plus per cent increase in internet banking fraud in the UK last year.

For concerned consumers there are alternatives to the traditional payment methods of credit and debit cards including the likes of PayPal. But even here there is typically a requirement for consumers to share some of their personal data and therefore create the scenario for it to be potentially compromised.

Although the various online payment solutions make a great play of their comprehensive refund policies this inevitably involves lots of hassle and requires much effort from the consumer. And the bottom line is that the consumers' ID has been compromised.

Research has shown that the risk of ID fraud continues to make a broad group of consumers very reluctant to shop online. In its Fifth Annual UK Online Fraud Report CyberSource found that 41 per cent of people who do not currently shop online cite concerns about the security of online shopping as the reason.

Most of these individuals are undoubtedly unaware that there are some alternative products in the marketplace that do not require them to give any personal details at all before allowing them to conduct a transaction online. This is the case with Ukash, with shoppers able to buy a voucher offline that includes a unique number that is entered online to make a payment.

Having an 'offline break' in this way is proving an effective hurdle to ID fraud. Such a step is integral to the PIN devices that are now being issued by the banks (Barclays' example is called PINSentry) that produce unique codes when a user's card is entered into the unit. This number is then entered online and acts as verification before allowing any money transfers.

We believe reluctant potential online consumers are keen to see alternatives to the traditional payment methods for making online purchases. But for this to happen most effectively it ideally requires some trusted retail brands to begin to offer such products and to then explain them to these concerned consumers.

The payback for retailers will be the extra sales volumes that this will likely create as the undoubtedly sizeable band of reluctant internet shoppers suddenly recognise they can make purchases online without any risk whatsoever of their ID being compromised.

Mark Chirnside is chief executive of Ukash

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