** Credit-Card Fraud 12 Times Higher Online

Online merchants are literally paying the price for not knowing

their customers, according to a new Gartner Group study.

Researchers found that credit-card fraud on the Internet is a

whopping 12 times higher than that at conventional stores--a

discrepancy that translates into merchant fees high enough to hurt

the profitability of E-businesses.

The survey, which tracked credit-card fraud at 165 conventional,

online, and hybrid retailers, found that 1.15% of all online

purchases were fraudulent, compared with only 0.06% to 0.09 % of

purchases made in the real world. And, 64% of all charge-backs,

where consumers are credited for charges made on their cards, are

the result of fraud in the online world, while only 44% of charge-

backs in offline businesses are fraudulent.

"Fraud is easier on the Internet, where you're dealing with

anonymous entities. You don't have to walk into a store and sign a

receipt," Gartner analyst Avivah Litan says. "This is not just a

mom-and-pop issue. And it's really eating into the margins of

online merchants, who not only have to absorb all the cost but

also pay much higher fees to credit-card companies, resolve

disputes, and absorb the cost of those disputes."

So what's a Web site to do? If you can afford it, use a fraud-

protection service such as CyberCash or an Internet money system

such as PayPal, though that will eat into your revenues, too,

Litan says. "You're always going to have to support credit cards

if you want to do business with consumers." - Cheryl Rosen