Conspiracy of Silence

SAN FRANCISCO (03/05/2000) - Popular perceptions change as fast as everything else in the Internet Economy. Over the past year or two, for instance, the companies engaged in e-commerce have done a good job of reframing the discussion of fraud on the Net.

It wasn't long ago that the Web was viewed as a lawless frontier, a place where you used a credit card - or let your children wander - at your peril. Today, it's seen more as a friendly shopping mall: There might be a few rogues around, such as those responsible for the recent hacking spree, but consumers going about their daily rounds don't have much to fear.

In truth, the risk to consumers has always been minimal. To begin with, no one is ever liable for more than $50 in fraudulent credit card usage, and card companies will often forgive the 50 bucks. It's also quite difficult to intercept a credit card number traveling across the Net - much more difficult than it is to fish a receipt out of a garbage can. Hackers have broken into databases and stolen thousands of card numbers at a time, but such break-ins are rare, and brick-and-mortar stores also have databases, leaving them subject to some of the same threats.

But that does not mean that fraud isn't a problem. As Miguel Helft's story points out, credit card fraud is actually a major issue for many Net merchants, and good solutions are not in sight. Yet instead of attacking the problem head-on, credit card companies and banks have chosen to deny that it exists - and that's a great disservice to everyone engaged in e-commerce.

It isn't hard to see why financial institutions would want to downplay the problem. If consumers aren't confident that the Net is secure, they won't shop there - and the fact that they aren't actually liable for most of the losses can easily be subsumed beneath a general nervousness. Furthermore, nobody wants to put ideas in the heads of potential miscreants.

But sweeping the problem under the rug is a short-term solution at best. It's the equivalent of the local police department declining to report crimes in order to avoid spooking the populace: It might work for a little while, but people don't like being misled, and in the long run they have other means of judging the safety of their communities. When Miguel began reporting his story, he immediately ran into accusations that he was trying to trump up and sensationalize a problem that wasn't there. How dare you ask about such things? was the implication.

Don't you realize that it's not in anybody's interest to discuss the subject?

We think that it's important to get the issue out on the table, and to understand what the real fraud problem is and who's paying for it. Not surprisingly, smaller merchants bear most of the costs. So the next time you hear Visa USA Inc. or MasterCard or a big online merchant say that fraud isn't an issue, consider the source. And consider whether your own business - or the one you might be thinking of starting - is really so invulnerable.

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