Fraud risks in e-commerce transactions

Electronic commerce is defined as doing business electronically. In Europe, the volume of e-commerce transactions has been constantly on the rise over the past few years. In 2001, the volume of transactions was estimated at €65 million. The continuation of this promising development is endangered by the fact that Internet security breaches cost U.S.$15 billion last year with an upwards tendency in the future. Many companies have to date neglected the importance and application of the security technology available. Despite numerous violent attacks, companies are still not taking the security issue seriously. They spend twice as much on the results of damage as on preventing them. While the application of well functioning firewalls, intrusion detection and other technological measures is important, business practices and a perfectly working security policy are even more vital. In fact, above all the fear of deceptive use of credit and debit card details provided during online transactions is holding many people back from e-commerce. The risks that are endangering the transaction process are numerous, including software and data manipulation, and manipulation of the transmission process or of the communication partner. Encryption disguises data in a way that stops anyone from reading it without the respective key. One major element in achieving secure money in online transactions is the so-called digital signature. To achieve broad acceptance of the digital signature, this type of signature has to be at a minimum as reliable as a handwritten signature. Liability in the event of loss from Internet fraud is an interesting and still not completely resolved problem. Up to now, in most cases the customer himself is liable in case of fraud. As far as the insurance issue is concerned, companies still fail to match the insurance needs of customers using the net for their business transactions. The products available are mostly combinations and modifications of existing products for other lines of business which do not match the requirements of online traders and shoppers. Only if security issues can be solved will clients feel safe in their transactions. It will be a vital challenge for the insurance industry to close the hopefully few remaining security gaps through specialized insurance covers that match the multiple demands of Internet traders and customers.