Saturday, January 20, 2007
PayPal to Offer Members Increased Security Option
Intending to boost consumer confidence in its online payment system -- and to thwart the scourge of phishing attacks aimed at its users -- eBay's PayPal will begin offering customers the option of using a password-generating device to beef up security. The system will use a key fob, known as the PayPal Security Key, an electronic key that can be clipped onto a key chain and can generate a random six-digit security code every 30 seconds. In order to log onto their PayPal accounts, users will have to enter the code with their ID and password. Business users will be given the key fob -- made for eBay by VeriSign -- free of charge; nonbusiness users will pay a one-time charge of US$5. Although the actual security improvements will be minimal, the two-factor authentication could enhance security considerably for PayPal users. PayPal customers are a favorite target of phishing scams, in which fraudulent e-mails claiming to be from PayPal encourage users to enter their IDs, passwords and other data into a fake or spoofed Web site.
Even if a phishing attack tricked a user into turning over all three forms of identification, the new random passcode would expire by the time the phisher attempted to access the user's PayPal account. The use of random password generators has found a niche in some corporate and government settings as an alternative to more advanced technology, such as fingerprint readers or retina scanners. Still, despite some high-profile security snafus, consumers are not yet clamoring for more security -- at least, not additional security measures that are seen as an inconvenience.
Banks and other financial institutions are among those that must lead the charge toward more robust online security solutions. Some banks currently require a second password or ask customers to designate a specific computer as a single access point for online banking, said analyst Avivah Litan. "Banks are recognizing that they must move beyond simple passwords," Litan said. While still viable for less sensitive Web sites and transactions, passwords alone are "no longer adequate for Internet banking." she added.
Meanwhile, the continued rise of phishing attacks has become troubling for many in the e-commerce community, in which identity theft is seen as a potential drag on the growth of online business -- especially in convincing reluctant consumers to shop online for the first time.
According to security firm MessageLabs, more than half of the millions of malicious e-mails it intercepts each month are now phishing-related. PayPal regularly ranks at or near the top of all companies that have their e-mail addresses spoofed by phishers. Banks are also a favorite target because they offer attackers the opportunity to gain direct access to a user's financial information if the attack is successful. The number of phishing attacks has more than doubled since 2004. Whereas most such attacks fail to hit their mark, the successful ones can result in significant losses of more than $1,200 per attack. Last year, banks racked up more than $2.7 billion worth of direct losses, such as fraudulent credit card payments that are written off, according to Gartner.
"There is also the risk of additional losses due to lower confidence in the security of the online world," Litan added.
eBay said the PayPal Security Key is now in beta testing, primarily by eBay employees, but should be widely available in the United States and select countries within two months. Reaction on eBay message boards has been largely positive, though some commented that eBay should give the key fobs away for free, as they are likely to boost sales by increasing the buyer's sense of security.
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Even if a phishing attack tricked a user into turning over all three forms of identification, the new random passcode would expire by the time the phisher attempted to access the user's PayPal account. The use of random password generators has found a niche in some corporate and government settings as an alternative to more advanced technology, such as fingerprint readers or retina scanners. Still, despite some high-profile security snafus, consumers are not yet clamoring for more security -- at least, not additional security measures that are seen as an inconvenience.
Banks and other financial institutions are among those that must lead the charge toward more robust online security solutions. Some banks currently require a second password or ask customers to designate a specific computer as a single access point for online banking, said analyst Avivah Litan. "Banks are recognizing that they must move beyond simple passwords," Litan said. While still viable for less sensitive Web sites and transactions, passwords alone are "no longer adequate for Internet banking." she added.
Meanwhile, the continued rise of phishing attacks has become troubling for many in the e-commerce community, in which identity theft is seen as a potential drag on the growth of online business -- especially in convincing reluctant consumers to shop online for the first time.
According to security firm MessageLabs, more than half of the millions of malicious e-mails it intercepts each month are now phishing-related. PayPal regularly ranks at or near the top of all companies that have their e-mail addresses spoofed by phishers. Banks are also a favorite target because they offer attackers the opportunity to gain direct access to a user's financial information if the attack is successful. The number of phishing attacks has more than doubled since 2004. Whereas most such attacks fail to hit their mark, the successful ones can result in significant losses of more than $1,200 per attack. Last year, banks racked up more than $2.7 billion worth of direct losses, such as fraudulent credit card payments that are written off, according to Gartner.
"There is also the risk of additional losses due to lower confidence in the security of the online world," Litan added.
eBay said the PayPal Security Key is now in beta testing, primarily by eBay employees, but should be widely available in the United States and select countries within two months. Reaction on eBay message boards has been largely positive, though some commented that eBay should give the key fobs away for free, as they are likely to boost sales by increasing the buyer's sense of security.
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Neteller Founders Arrested in Gambling Crackdown
Two founders of a company that processes Internet gambling transactions were arrested and charged with funneling billions of dollars in gambling proceeds to overseas betting operations, federal prosecutors announced Tuesday. The charges mark the latest in a series of crackdowns by the federal government against the online gambling industry. The charges against the former Neteller directors, John David Lefebvre, 55, and Stephen Eric Lawrence, 46, both Canadian citizens, were contained in two criminal complaints unsealed in U.S. District Court in Manhattan on Monday, U.S. Attorney Michael Garcia said in a statement.
The prosecutor said the men knew when they took their company public that its activities were illegal. FBI Assistant Director Mark J. Mershon said the multibillion-dollar online gambling industry is "a colossal criminal enterprise masquerading as legitimate business." Neteller is an Internet payment services company that has grown in popularity as an increasing number of credit card companies have begun refusing to accept payments to online gambling sites. Neteller essentially acts as a middleman between gamblers and offshore betting operations. For example, a gambler who wants to place bets at offshore sports books can fund an account with Neteller, which in turn will transfer the money to the betting sites. Prosecutors say Neteller facilitated the transfer of billions of dollars of illegal gambling proceeds.
Lefebvre was arrested Monday in Malibu, Calif., and was scheduled to appear in U.S. District Court in Los Angeles on Tuesday. Lawrence, who lives in the Bahamas, was arrested Monday in the U.S. Virgin Islands and will appear in federal court on Wednesday. Peter Neiman, a lawyer for Lawrence, said he had no comment. A lawyer for Lefebvre did not immediately return a telephone message seeking comment. In 1999, the men founded Neteller, which is based in the Isle of Man and is publicly traded in the United Kingdom. The company began processing Internet gambling transactions in 2000. Lawrence left the company's board of directors in October, while Lefebvre left in December 2005, prosecutors said. Together, the men owned as much as 35 percent of the company's outstanding shares. Prosecutors cited Neteller's 2005 annual report in saying that Lawrence and Lefebvre enabled the company to provide payment services to more than 80 percent of worldwide gaming merchants.
Garcia noted that the company acknowledged when it went public that U.S. law prohibited people from promoting certain forms of gambling, including Internet gambling and transmitting funds that are known to have been derived from criminal activity. Lefebvre and Lawrence also conceded in the company's offering documents that they were risking prosecution by the U.S. government, he said. Prosecutors said Neteller in 2005 alone processed more than US$7.3 billion in financial transactions, 95 percent of which was derived from money transfers involving Internet gambling.
Lawrence and Lefebvre were charged with conspiring to transfer funds with the intent to promote illegal gambling, and could face up to 20 years in prison if convicted.
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The prosecutor said the men knew when they took their company public that its activities were illegal. FBI Assistant Director Mark J. Mershon said the multibillion-dollar online gambling industry is "a colossal criminal enterprise masquerading as legitimate business." Neteller is an Internet payment services company that has grown in popularity as an increasing number of credit card companies have begun refusing to accept payments to online gambling sites. Neteller essentially acts as a middleman between gamblers and offshore betting operations. For example, a gambler who wants to place bets at offshore sports books can fund an account with Neteller, which in turn will transfer the money to the betting sites. Prosecutors say Neteller facilitated the transfer of billions of dollars of illegal gambling proceeds.
Lefebvre was arrested Monday in Malibu, Calif., and was scheduled to appear in U.S. District Court in Los Angeles on Tuesday. Lawrence, who lives in the Bahamas, was arrested Monday in the U.S. Virgin Islands and will appear in federal court on Wednesday. Peter Neiman, a lawyer for Lawrence, said he had no comment. A lawyer for Lefebvre did not immediately return a telephone message seeking comment. In 1999, the men founded Neteller, which is based in the Isle of Man and is publicly traded in the United Kingdom. The company began processing Internet gambling transactions in 2000. Lawrence left the company's board of directors in October, while Lefebvre left in December 2005, prosecutors said. Together, the men owned as much as 35 percent of the company's outstanding shares. Prosecutors cited Neteller's 2005 annual report in saying that Lawrence and Lefebvre enabled the company to provide payment services to more than 80 percent of worldwide gaming merchants.
Garcia noted that the company acknowledged when it went public that U.S. law prohibited people from promoting certain forms of gambling, including Internet gambling and transmitting funds that are known to have been derived from criminal activity. Lefebvre and Lawrence also conceded in the company's offering documents that they were risking prosecution by the U.S. government, he said. Prosecutors said Neteller in 2005 alone processed more than US$7.3 billion in financial transactions, 95 percent of which was derived from money transfers involving Internet gambling.
Lawrence and Lefebvre were charged with conspiring to transfer funds with the intent to promote illegal gambling, and could face up to 20 years in prison if convicted.
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Thursday, January 11, 2007
eBay to Acquire StubHub for $310 Million
eBay announced Wednesday that it will purchase the rapidly growing online ticket broker StubHub for $310 million in cash. The sale, expected to close before April, punctuates another improbable Internet success story. StubHub's 32-year-old co-founder and chief executive, Jeff Fluhr, with Eric Baker launched the San Francisco startup 6 1/2 years ago during the dot-com bust.
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Monday, January 08, 2007
2006 E-Tail Tally Over $100 Billion
E-tailers rode a strong holiday season to record-smashing sales for 2006, with revenue topping US$100 billion for the first time, according to the latest data from comScore Networks. The report said retail spending reached $102.1 billion for all of 2006, a 24 percent increase over 2005 Web spending levels. Sales during the end-of-year holiday season were up 26 percent to $24.6 billion, the company said. comScore's data excludes travel spending, as well as money spent on online auctions and in large-scale corporate purchases. In 2005, spending was $82.3 billion for the full year and $19.6 billion for the holiday season, which spans about eight weeks at the end of the calendar year. comScore Chairman Gian Fulgoni called 2006 "an exceptional year for online retailers. "Growth remained very strong," he added. "The online holiday shopping season of course played a vital role in the year's success, as spending accelerated during the final two months of the year, helping push total online retail spending over the $100 billion threshold."
comScore also reported that e-commerce spending topped $600 million on 12 separate days during the holiday stretch, double the number of days during 2005 that recorded more than $500 million in sales. No single day during 2005 reached the $600 million level of online spending.
In 2006, the busiest online shopping day was Wednesday, Dec. 13 -- more than two weeks after the newly named Cyber Monday which now kicks off the holiday shopping season -- when consumers spent $667 million online. Cyber Monday, when $607 million was brought in, ranked as the 12th busiest shopping day. The later peak in spending suggests consumer were confident about shipping dates being met when buying later in the season. comScore said the largest surge in online buying came during the three weeks leading up to Christmas, when sales rose a full 45 percent compared to the previous year. "Online consumers pushed their buying later than ever," Fulgoni noted. Meanwhile, all 12 of the $600-million-plus spending days during the holiday season came on weekdays, suggesting consumers continue to do the bulk of their online buying from their workplace Internet connections, despite the continued rise in home-based broadband.
There had been warning signs that the rate of e-commerce growth would naturally slow as the numbers being used for comparison grew so large as to make double-digit gains more difficult. Nonetheless, the data suggest that consumers continue to embrace the Web as a shopping venue based on convenience, the ability to comparison shop easily, and other attributes. The strong e-tail numbers contrast more flaccid data that major retailers also released on Thursday. Wal-Mart and Target both issued relatively weak same-store sales reports, as did some major apparel clothing chains. Looking forward, e-commerce companies and boosters may need to remove some roadblocks to allow more growth, however. Gartner recently reported that as much as $2 billion in additional sales was likely lost during 2006 because of security concerns among consumers. Adding security may be easier said than done, because such measures may impede the very thing that attracts shoppers, said Gartner analyst Avivah Litan. "E-commerce service providers need to beef up security but they must be careful to keep the added measures relatively convenient," Litan said.
She added that smart online retail outlets can find ways to boost consumer confidence without increasing overly burdensome security requirements, such as additional authentication. One example would be to add back-end fraud protections that would be invisible to online buyers.
Other areas can also be improved. For instance, some e-tailers -- such as WalMart.com and Overstock.com -- experienced Web site crashes and slowdowns during the holiday period, a landmine that is more evocative of the earliest days of e-commerce.
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comScore also reported that e-commerce spending topped $600 million on 12 separate days during the holiday stretch, double the number of days during 2005 that recorded more than $500 million in sales. No single day during 2005 reached the $600 million level of online spending.
In 2006, the busiest online shopping day was Wednesday, Dec. 13 -- more than two weeks after the newly named Cyber Monday which now kicks off the holiday shopping season -- when consumers spent $667 million online. Cyber Monday, when $607 million was brought in, ranked as the 12th busiest shopping day. The later peak in spending suggests consumer were confident about shipping dates being met when buying later in the season. comScore said the largest surge in online buying came during the three weeks leading up to Christmas, when sales rose a full 45 percent compared to the previous year. "Online consumers pushed their buying later than ever," Fulgoni noted. Meanwhile, all 12 of the $600-million-plus spending days during the holiday season came on weekdays, suggesting consumers continue to do the bulk of their online buying from their workplace Internet connections, despite the continued rise in home-based broadband.
There had been warning signs that the rate of e-commerce growth would naturally slow as the numbers being used for comparison grew so large as to make double-digit gains more difficult. Nonetheless, the data suggest that consumers continue to embrace the Web as a shopping venue based on convenience, the ability to comparison shop easily, and other attributes. The strong e-tail numbers contrast more flaccid data that major retailers also released on Thursday. Wal-Mart and Target both issued relatively weak same-store sales reports, as did some major apparel clothing chains. Looking forward, e-commerce companies and boosters may need to remove some roadblocks to allow more growth, however. Gartner recently reported that as much as $2 billion in additional sales was likely lost during 2006 because of security concerns among consumers. Adding security may be easier said than done, because such measures may impede the very thing that attracts shoppers, said Gartner analyst Avivah Litan. "E-commerce service providers need to beef up security but they must be careful to keep the added measures relatively convenient," Litan said.
She added that smart online retail outlets can find ways to boost consumer confidence without increasing overly burdensome security requirements, such as additional authentication. One example would be to add back-end fraud protections that would be invisible to online buyers.
Other areas can also be improved. For instance, some e-tailers -- such as WalMart.com and Overstock.com -- experienced Web site crashes and slowdowns during the holiday period, a landmine that is more evocative of the earliest days of e-commerce.
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Customers Want Flexible Return Policies
When Matthew Card tried to return a ski jacket to L.L. Bean's flagship store in Freeport, Maine, he was pleasantly surprised. Card, a marketing manager at Davies Murphy Group in Burlington, Mass., bought the jacket online and could not produce a receipt or even an exact amount of the purchase price. Despite that, "they didn't give me a hard time. The only information I had to provide was the approximate amount the jacket cost at the time and around the date when I purchased it," he said. Card received a full refund, which he put toward a new ski jacket, a red-gray one as opposed to the green one he did not want. Card's experiences are not all that unusual -- at least not in 2007. A few years ago, though, he might have left the store with his green jacket in hand.
KPMG's New Retail Survey Even as e-commerce settles into maturity, however, retailers and their support system of e-commerce service providers and vendors continue to make incremental improvements in their return policy strategies. Unlike in previous years, the big attraction for holiday shoppers in 2006 was neither advertising nor special offers, according to KPMG's newly released annual National Shopping Behavior survey. Rather, 81 percent of consumers surveyed said they shopped at stores that carried the items they were looking for, and a whopping 75 percent said a simple return policy was a deciding factor. Price, according to the survey, was secondary, cited by just 19 percent of respondents as influencing their choice of a a retailer.
By contrast, respondents last year said price, selection and convenience were most important to them. Return policies are becoming more important to shoppers, particularly as they cross channels more often, John Rittenhouse, KPMG's national service leader for operations risk management said.
The shift to online buying appears to be stabilizing, according to the survey, with only 5 percent of shoppers switching a larger share of their holiday budget to the Internet in 2006, compared with 6 percent the prior year. As the new survey also found, online shopping remains a clear favorite among most buyers -- 62 percent of all respondents said they used the Internet to research an item, and 54 percent actually made a purchase. Predominantly, online shoppers were between the ages of 25 to 44, with incomes above US$50,000.
Retailers have finally developed viable cross channel return strategies, as a result. "Consumers want to have a choice of returning an item bought online to a bricks and mortar store," Rittenhouse said, "or, for that matter, to be able to pick up something ordered online at a nearby store."
What they want is the convenience of a completely homogenized retailer, he added. For the most part, they are getting it. The largest retailers, such as Wal-Mart and Best Buy, have systems that allow customers to return goods to their stores, Eugene Fram, a marketing professor at Rochester Institute of Technology's Business College said. "Some might have restrictions, such as only offering merchandise credit in place of a cash refund," Fram said. "A 'bricks and clicks' operation that requires online customers to handle the time and financial costs [of returning] merchandise through the mail or UPS is only hassling its clientele. It never pays in the long run to hassle customers."
The return processes that retailers have in place, though, are not perfect. One problem they still grapple with: how to handle items not carried by a particular store. "Some retailers, such as Macy's, are targeting their merchandise selections to specific customer groups surrounding each store. Consequently, handling the return of merchandise not carried by a specific store will be an increasingly costly problem that must be addressed," said Fram. Vendors and service providers are becoming more granular with their product offerings and claim that even these one-off problems will be solved as newer generations of products and applications come online.
PS, for instance, has a return portfolio that allows even small businesses to mimic the return strategies of an Overstock.com or Amazon.com, said Steve Holmes, a spokesperson for the shipping giant. UPS' Electronic Return Label system allows a retailer to send a customer a return label via e-mail. A more advanced solution, its Return on the Web product, is embedded into the retailer's Web site. The retailer, Fram explained, can set its own business rules concerning the return policy -- rules that can include whether a return should be permitted at all and a means for automating the various addresses to which certain SKUs must be sent. "What is great about all these applications is that both sides can access tracking technology to see the status of the return," said Holmes. "If nothing else, that saves a call from the consumer into the contact center."
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KPMG's New Retail Survey Even as e-commerce settles into maturity, however, retailers and their support system of e-commerce service providers and vendors continue to make incremental improvements in their return policy strategies. Unlike in previous years, the big attraction for holiday shoppers in 2006 was neither advertising nor special offers, according to KPMG's newly released annual National Shopping Behavior survey. Rather, 81 percent of consumers surveyed said they shopped at stores that carried the items they were looking for, and a whopping 75 percent said a simple return policy was a deciding factor. Price, according to the survey, was secondary, cited by just 19 percent of respondents as influencing their choice of a a retailer.
By contrast, respondents last year said price, selection and convenience were most important to them. Return policies are becoming more important to shoppers, particularly as they cross channels more often, John Rittenhouse, KPMG's national service leader for operations risk management said.
The shift to online buying appears to be stabilizing, according to the survey, with only 5 percent of shoppers switching a larger share of their holiday budget to the Internet in 2006, compared with 6 percent the prior year. As the new survey also found, online shopping remains a clear favorite among most buyers -- 62 percent of all respondents said they used the Internet to research an item, and 54 percent actually made a purchase. Predominantly, online shoppers were between the ages of 25 to 44, with incomes above US$50,000.
Retailers have finally developed viable cross channel return strategies, as a result. "Consumers want to have a choice of returning an item bought online to a bricks and mortar store," Rittenhouse said, "or, for that matter, to be able to pick up something ordered online at a nearby store."
What they want is the convenience of a completely homogenized retailer, he added. For the most part, they are getting it. The largest retailers, such as Wal-Mart and Best Buy, have systems that allow customers to return goods to their stores, Eugene Fram, a marketing professor at Rochester Institute of Technology's Business College said. "Some might have restrictions, such as only offering merchandise credit in place of a cash refund," Fram said. "A 'bricks and clicks' operation that requires online customers to handle the time and financial costs [of returning] merchandise through the mail or UPS is only hassling its clientele. It never pays in the long run to hassle customers."
The return processes that retailers have in place, though, are not perfect. One problem they still grapple with: how to handle items not carried by a particular store. "Some retailers, such as Macy's, are targeting their merchandise selections to specific customer groups surrounding each store. Consequently, handling the return of merchandise not carried by a specific store will be an increasingly costly problem that must be addressed," said Fram. Vendors and service providers are becoming more granular with their product offerings and claim that even these one-off problems will be solved as newer generations of products and applications come online.
PS, for instance, has a return portfolio that allows even small businesses to mimic the return strategies of an Overstock.com or Amazon.com, said Steve Holmes, a spokesperson for the shipping giant. UPS' Electronic Return Label system allows a retailer to send a customer a return label via e-mail. A more advanced solution, its Return on the Web product, is embedded into the retailer's Web site. The retailer, Fram explained, can set its own business rules concerning the return policy -- rules that can include whether a return should be permitted at all and a means for automating the various addresses to which certain SKUs must be sent. "What is great about all these applications is that both sides can access tracking technology to see the status of the return," said Holmes. "If nothing else, that saves a call from the consumer into the contact center."
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