Introduction

Consumer confidence in the security and trustworthiness of business conducted over the Internet is the single most important issue facing electronic commerce today. Internet-based credit card fraud is reaching epidemic proportions and is driving hundreds of online businesses to the brink of extinction when their merchant banking relationships are terminated due to excessive fraud and chargeback costs. According to the Gartner Group (www.gartner.com), fraud is 12 times higher on the Internet than in the physical world of face-to-face or Mail Order/Phone Order (MOTO) sales. Cybersource (www.cybersource.com) reports that 83 percent of online merchants complain of the problems they experience with fraudulent charges on credit cards.

The Internet is fundamentally changing the way we do business. The traditional ideas of the marketplace and the consumer have morphed into previously unheard of models as technology evolves. The Internet is also changing our concept of money. New online forms of payment come forth regularly. Some of these nontraditional currencies are bringing about new challenges and new rewards to businesses and consumers alike. But, as the saying goes, the more things change, the more they stay the same criminals exist online just as they do in the physical world, and many of them are working feverishly to beat the system.

Security and trust issues loom even larger when you look at projected volumes of business via the Internet over the next few years. Industry experts such as International Data Corporation estimate that $220 billion will be spent worldwide via the Internet in 2002, up...