Online shopping sites miss fraud protection cut-off

SOUTH African shopping websites have missed the deadline for a new payment system that would protect online shoppers from fraud.

The chief executive of the Payments Association of South Africa, Walter Volker, said almost 50% of credit card fraud took place online despite only 2% of transactions taking place online.

Last year, credit card fraud amounted to R380-million. Almost half, a total of R178 million, was from online shopping in the country.

A new payment system, endorsed by the South African Reserve Bank, will send every online shopper a one-time pin, via SMS to their cellphones, which the consumers needs to enter on the site to make their purchase.

This system is currently used by some banks to secure online banking.

The payment system known as 3D Secure was supposed to be introduced in February by every local website that sells goods online.

The deadline had been supported by the Reserve Bank.

Volker said 91% of online retailers met the February deadline but airlines selling tickets on the internet were not ready.

"Banks have been reporting implementation statistics on a regular basis and the delayed implementation of the 9% of merchants never came as a surprise to the Payments Association or the South Africa Reserve Bank."

Volker told Times Media the level of online fraud meant there had to be new systems in place. His association previously introduced the pin used in most ordinary credit card transactions.

Volker said some online retailers had opposed the idea of the 3D Secure system. "As with any new mandate introduced, there has certainly been some resistance from the e-commerce merchant community and a number of challenges that needed to be addressed."

Mango airlines spokesman Hein Kaiser said: "Mango has several measures in place to curb bank card fraud."

He did not respond to questions on why Mango had missed the deadline to implement the new system that would send a one-time code to every shopper.

Marketing manager for Kulula and British Airways Shaun Pozyn said: "Kulula.com fully supports secure online shopping and already has a comprehensive fraud management process in place to deal with potential fraudulent transactions."

He said: "The volume of e-commerce transactions facilitated by the airlines slowed down the implementation of new technology.

"We are currently working with our technology providers to prepare our readiness for the implementation of 3D Secure across our multiple e-commerce platforms.

"While we do not currently have a definitive date for activation we anticipate that we will be ready somewhere towards the third quarter of this year."

South African Airways did not respond to requests for comment. - Katharine Child