Equifax Secure, the e-commerce division of the credit bureau Equifax Inc., has started PayNet Secure, a system for online merchants to verify the identities of customers and reduce fraudulent transactions.
PayNet Secure confirms the identity of a consumer in a card-not-present transaction by comparing information in Equifaxs database with data on the buyers purchase form.
After the person fills out the form at the merchants Web site, the information is encrypted and routed electronically to Equifax, which checks things such as the persons Social Security and drivers license numbers. PayNet Secure then asks the person two to six multiple-choice questions to confirm his or her identity. The system might ask about the size of a mortgage, or whether the person has a student loan.
The questions are based on information from Equifaxs credit history database, which is linked to most lending organizations nationwide and can verify the credit of 190 million people.
C. Richard Crutchfield, executive vice president and group executive of Equifax Secure in Atlanta, said the personal information enables Equifax to ask questions that they know and we know, and no one else knows.
Once the consumer answers the questions, Equifax checks the answers and either verifies the persons identity or, in case of a rejection, suggests that he or she try completing the transaction another way.
Paymentech Inc., the Dallas card processor that specializes in card-not-present transactions, is offering the system to its merchant customers. Microsoft Passport, a service that offers access to many Web sites through a single sign-in procedure, is also making PayNet Secure available to its customers.
Through the Microsoft Passport alliance with Equifax, people can go through verification just once. Then they get a PIN that they can use when making subsequent payments.
John Shirley, group manger for e-business product development at Paymentech, said his company processes payments for 16 of the top 20 e-retailers, including Amazon.com and American Online.
People visiting Paymentech-powered Web merchants will have to opt in to the verification service, Mr. Shirley said. If they refuse to be verified by PayNet Secure, it will be up to the merchant whether to continue the transaction, he said.
James Van Dyke, a senior analyst at Jupiter Communications, said, Its not clear how customers will react to PayNet Secures questions. There is a fine line when you are doing the most to prevent fraud and the most to protect privacy, and the more you do to prevent fraud, the more you cross the border of areas that raise privacy concerns.
Merchants that use PayNet Secure will still be responsible for chargebacks, Mr. Crutchfield said. We are working with Paymentech to create a transaction guarantee, but for now if there is fraud, the merchant has an audit trail to send the police right to the violators front door.