Fear of the Black Hats

If the high-tech approach doesn't work, security consultants say the human touch usually does. Ethical hackers have been known to rummage through trash bins and dumpsters to find useful info. Sometimes, hackers resort to "social engineering" — or, as it's more commonly known, lying. A hacker — often posing as an HR employee — phones a staffer, then tries to pry out information. Remarkably, Network Security Technologies and Internet Security Systems (www.iss.net) report a near 100 percent success rate with such ruses. —KJB

For Everything Else, There's Theft
As corporations beef up network security for the virtual world, hackers say it's getting easier to steal the currency of the realm — credit card numbers. These days, you can't take three steps in cyberspace without coming across illegally obtained credit card numbers, either in chat rooms, newsgroups, or Web sites.

The statistics are alarming. Visa International estimates that online fraud happens three times more frequently than offline fraud. And according to technology research firm Meridien Research Inc. (www.meridien- research.com), 10 percent of online transactions last year were fraudulent.

Such a forecast spells trouble for E-tailers. Since online purchases fall into the Card Not Present category, credit card vendors hold virtual merchants 100 percent liable for fraudulent charges. In addition to loss of revenues, E-tailers often pay transaction fees and penalties for accepting stolen numbers. By contrast, bricks-and-mortar merchants do not eat the loss for fraudulent charges — card vendors do.

This is not to say online credit fraud is inevitable. Companies such as ClearCommerce Corp. (www.clearcommerce.com), in Austin, Texas; CyberSource Inc. (www.cybersource.com), in Mountain View, California; and HNC Software Inc. (www.hnc.com), in San Diego, offer services that compare shoppers' E-mail addresses with their Internet protocol and shipping addresses. "We can see if someone else using the account has made large dollar purchases," says Tracy Wilk, vice president of product management for CyberSource, "or if they're downloading their software purchase to Poland even though their credit card bills go to California."

Despite phony plastic, James Van Dyke, senior analyst at consultancy Jupiter Research (www.jup.com), says it's important for retailers to maintain an online presence. "When PCs came out, people feared they would delete files by pressing the wrong key," he recalls. "But they realized using computers generated income. Online shopping is the same. There's more to lose than to win by not starting an online business." —KJB

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