Friday, August 13, 2004

Oops... payment of 3000 euro via the phone?

An active student, Tjalling Kuipers, has started a public discussion on the new product feature of a phone payment product: KPN Switchpoint. The product now allows for payment up to an amount of 3000 euro. Quite a lot and all the checking is IP-address, account number and phone number. So the premium services fraud and 'ghost-bill' problem may now become bigger due to the unsecurity in the home environment.

In the back office, KPN makes use of a one-off direct debit mechanism. Although formally not allowed by banks, an increasing number of players in the Internet market 'forget' these rules and find their bank willing to use the mechanisms to ensure quick payment. The consumer however has to suffer, as they are unable to reverse the payment in case of fraud.

My solution to this problem, which will hopefully be introduced any time soon now, is to shift the reversability and fraud problem to the acquiring bank involved in these set-ups (see this previous logentry of one and a half year ago). Consumers should always be able to reverse the payment of an off-line direct debit. This provides the merchant, payment service provider and acquiring bank the incentives to ensure that fraud levels remain low.