A Service to Combat Fraud
HNC Software Inc. in San Diego has announced a service that will give Web retailers new tools for detecting credit-card fraud in Internet transactions.
Fraud has become less of a problem now that online retailers have real-time credit-card authorizations, said Elaine Rubin, chairwoman of Shop.org, a Silver Spring, Md.-based trade association for Web retailers. But those that sell quickly downloaded intangibles, such as software and music, still need better and faster tools for fraud detection than simple bank authorizations provide.
HNC's service, called eFalcon, is similar to the fraud-detection service the company already provides for nine of the top 10 credit-card issuers in the U.S. The service is built on neural network technology that sorts through volumes of transaction-level data for patterns of fraud and provides a rank-ordered scoring system that users can adjust to set their own fraud parameters. Pricing for the service is based on transaction volume.
As part of the service, eFalcon users will give HNC access to purchase-level data, which HNC will use to continually refine its fraud-detection data models, said Wesley Wilhelm, director of consulting at HNC.
Analysts said HNC could eventually sell this valuable data on the shopping patterns of Web consumers, but Wilhelm denied that. "No, our focus is fraud," he said.
The eFalcon service could be one of the cornerstones of providing fraud protection for online merchants, said Joe Barrett, an early eFalcon user as co-founder of EC Direct Corp. The Seattle company provides e-commerce infrastructure for clients that include NBC and Microsoft Press.
"Because of HNC's reputation, this will go a long way toward building the credibility the Internet needs and give shoppers and merchants the same fraud-protection assurances," Barrett said.
"HNC knows this space well and has a rich technology base for fraud detection," said Allen Bonde, an analyst at The Extraprise Group Inc., a Boston consultancy. "They are certainly a company to keep an eye on in this area."