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Internet fraud hits small businesses

Jul 10 2003

Small businesses trading online are being so badly hit by bills for internet and telephone fraud that it is threatening the future of e-commerce.

This is the message from the Federation of Small Businesses (FSB), which has informed E-Commerce Minister Stephen Timms of their concerns.

Many small businesses do not realise that in cases of internet credit card fraud and other types of fraud where the cardholder is not present, the retailer is liable for the cost. Credit card authorisation simply indicates that a card has not been lost or stolen and has sufficient funds, but is not a guarantee of payment. This is in contrast to cardholder-present fraud where the card issuer is liable.

The cost of internet fraud in Britain has risen from Ł3.8 million in 2000 to Ł28 million a year and rising. Many small businesses are avoiding trading online because of the risk of fraud, according to the FSB. One business was forced to shut its website after paying out Ł2,500 in charges.

THE FSB is worried that the advent of the new chip and PIN credit cards (whereby a 4-digit number is typed in instead of signing a paper receipt), which are due to be established in the UK by December 2004, will drive those attempting credit card fraud online.

It has called for card issuers to be liable for internet fraud in order to encourage small businesses to trade online. For more information on this, go to www.fsb.co.uk. To find out more on the new chip and PIN system, go to www.chipandpin.co.uk.

(9/7/03)

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