Banks pledge to fight Internet fraud
By : Bogda zukowska
Following the first major report of Internet banking fraud last month, banks are pledging to beef up security in 2001 to protect their customers' accounts and restore faith in online business transactions.
National savings bank Powszechna Kasa Oszczednosci Bank Polski (PKO BP) had its security breached in December when more than 12 customers said their cards had been used illegally. PKO BP said this was the first time a theft on this scale had occurred and launched an immediate investigation. It said it is now also considering ways to boost security and repair credibility damage. Meanwhile, the bank has agreed to refund clients zl. 61,000-zl. 70,400 debited from their accounts.
Some of the bank's customers, who were charged an average of zl. 4,050 per purchase, all at onvia (http://www.onvia.com), a U.S. Net shop, were pleased with PKP BP's swift response to resolving the problem.
"The good news is that my claim was accepted, and a day before Christmas I got money put back into my account," said Tomasz Wolniarski, a technician at Warsaw University and one of the victims of the fraud. "But the bad news is that my bank lacks security."
One of the anti-fraud measures that PKO BP is now considering is a "virtual card" for e-commerce purchases only. The card was launched last month by Polcard, a clearing house for payment card transactions.
"The interest (in the card) is huge, and we hope to conclude talks soon with a big listed bank," said Elzbieta Kuzio, Polcard's president.
The company said that despite last month's news, card fraud has dropped in recent years.
"We do not track Internet fraud, but generally card fraud declined in the first half of 2000 to 0.12% (of Polcard's total customer transactions), from 0.17% of 1999's total and 0.23% of 1998's total," said Renata Gawkowska, a Polcard spokeswoman.
But as credit card business has grown during the past few years, so have the risks. Polcard handled 22.8 million transactions in the first three quarters of 2000, compared to 15.8 million in 1999 and 7.3 million in 1998. These deals totaled zl. 4.5 billion ($1 billion), zl. 3.7 billion ($840 million) and zl. 2 billion ($454 million) respectively.
Virtual cards, bankers said, aim to boost payment card usage at banks by making e-purchases safe and easy for clients. "E-commerce is still in its infancy and is not progressing sufficiently, mainly because of clients' doubts about security," said Wielkopolski Bank Kredytowy (WBK) President Jacek Ksen.
WBK and a subsidiary of Bank Rozwoju Eksportu (BRE) each hold a 28.6% stake in eCard (http://www.ecard.pl), the first Polish clearing company used solely for e-commerce. Since starting in October, eCard has agreements with nine e-shops, but according to company President Grzegorz Lindenberg it will have hundreds by 2002.
Other major players in the plastic money business are Bank Pekao with about 860,000 cards issued and WBK with 600,000 clients. According to Agata Bartosiak of Pekao's press office, fraudulent card purchases on the Net are rare. WBK's Gajdzinski said "no such cases have been reported yet."
Poland's Consumer Federation (PCF) said it has received no complaints about e-commerce fraud to date. PCF head Malgorzata Niepokulczycka said this is mainly due to the small scale of the Polish e-commerce sector. According to a PCF study published in December, there are only about 650 Net shops offering limited services, and only 13% of them accept payments by card. The rest follow the traditional cash-on-delivery basis. "No doubt the share of cards will rise and so will the demand for enhanced security," Niepokulczycka said. "It's the banks' job. We will also be pushing to pass the legislation on electronic signatures." A draft has been submitted to the Sejm by a group of MPs pledging to pass the law before this year's parliamentary elections.
