Visa pushes online security software on merchants and banks

IT managers for online retailers and at banks that issue Visa cards will soon be confronted with installing the latest weapon in the ongoing struggle against online fraud: payer authentication applications.

Visa U.S.A. Inc. is working with several vendors in rolling out the new service, such as application service provider (ASP) ValiCert Inc. in Mountain View, Calif., and Internet service provider Yahoo Inc. in Sunnyvale, Calif. The service will require cardholders to use a password to complete online purchases.

To date, online retailers Inc., Inc., Inc. and CDnow Online Inc. have signed on to try the authentication service, which takes about three weeks to install on their e-commerce servers. Banks will be required to install a database application that holds user passwords on their access control servers.

The system works by intercepting an online purchase transaction at the card-issuing bank. When a cardholder fills his online shopping cart and pushes the "buy" button, a Visa-branded window pops up asking for a password.

Cardholders can register for the password service online, directly with their card-issuing bank or when activating a new card.

Foster City, Calif.-based Visa has persuaded three of its top member banks -- First USA Bank NA in Wilmington, Del., FleetBoston Financial Corp. in Boston and Providian Financial Corp. in San Francisco -- to sign on for the service. Visa said it expects to eventually win over all 14,000 of its card-issuing banks.

Banks and merchants can either install the service themselves by following open specifications or they can hire an authorized ASP to install it for them. Visa is offering the service for free during its initial run but plans to charge about $2,000 per license thereafter.

Jim McCarthy, senior vice president at e-Visa, Visa's e-commerce division, said online purchases represent only 3% of Visa's overall sales. While that's expected to grow to 10% by 2005, he said, consumers are likely to remain wary of shopping online without a unique electronic signature that only they can provide. Online purchases, McCarthy said, account for the highest amount of purchase fraud -- 24 cents for every $100 spent, compared with 6 cents for every $100 overall.

"We do see a day that every Visa cardholder that transacts online will be asked to identify himself to complete the purchase," he said.

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Copyright © 2001 IDG Communications, Inc.

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