The ever-expanding dot-com graveyard added a new name to its roster over the weekend. Flooz.com, the company that dealt in Internet-based currency and electronic gift certificates, quietly closed its virtual doors. Among its other difficulties, Flooz was, according to early reports, a victim of massive credit card fraud of at least US$300,000.
When one of the biggest hurdles facing e-commerce is consumer trust and secure payment options, the unceremonious bilking of Flooz and its ultimate collapse do not bode well for online credibility.
The U.S. Federal Bureau of Investigation (FBI) is reportedly investigating a possible organized credit card theft ring operating out of the Philippines and Russia. The perpetrators apparently purchased Flooz currency with stolen credit card numbers. Once owners of those cards began to report mysterious charges on their monthly statements, Flooz.com’s credit-card processing company, by necessity, froze the company’s accounts.
By today’s standards, $300,000 is not a lot of money. However, in the challenging dot-com economy, losing that amount is significant. Further, the credit-card processing company reportedly held upwards of $1 million of Flooz.com’s money to cover what was emerging as a highly suspicious pattern of inaccurate charges.
For a New Economy player like Flooz.com, losing touch with a cool million was probably enough to quickly and irreversibly shut the company doors.
Who are the real victims of this heist?
The obvious sacrificial lambs include the personnel who answered the phones and handled accounts receivable, marketing, promotion and sales at Flooz.com. Once again, an entire corporate population finds itself unemployed and disillusioned. Only this time, the newly unemployed will hit the streets in a weakening economy with unemployment figures that are gradually creeping up.
But in a sense, all consumers are the victims here. One of the biggest roadblocks that e-commerce has encountered is public trust. Those who still haven’t seen fit to use a credit card on the Internet will likely take the Flooz news as more evidence of the danger of doing so.
The irony here is that Flooz currency could easily have introduced many individuals to the world of online shopping. Flooz sold a type of electronic gift certificate that enabled its recipient to go shopping at various Web sites. Wisely, Flooz targeted corporate clients who would use the certificates as incentive rewards for individual employees’ job performance.
Are those who received the Flooz currency breathing a sigh of relief that they did not use their own credit cards online? Or are they frustrated that their unused gift certificates are now worthless?
Either way, everybody loses. The troubled site files Chapter 11, trust in online shopping takes another hit, and e-commerce takes yet another giant step backward.
Bring on the Tech
Is there a solution to this now too-familiar course of events? Can future efforts by rampant credit-card thieves be thwarted?
Well, there are smart cards. Unfortunately, the public has yet to find out, en masse, about smart cards, and even when consumers learn about them, the consumers are immediately suspicious.
Smart cards, you will recall, have an embedded microchip that replaces the familiar magnetic strip on the back of a credit card. Supposedly, the cards create a secure environment for consumers to exchange personal information with Web sites.
Not So Smart?
The upside is the potential for secure transactions. The downside is that use of the card requires special equipment.
To date, the public has not lined up in big numbers to secure smart cards. It might be a case of technology overkill. After all, it is technology that so many Americans fear, and smart cards are set to take technology to a new level.
In addition to the need for additional hardware, critics say a smart card is still just another credit card. It can be lost or stolen, and replacing it will be twice the hassle of replacing a regular credit card.
Those who have already written off smart-card technology have come out in favor of biometrics. That’s a fancy word for recognition systems that scan such things as your voice, fingerprints, face or eye to identify you as the authentic owner of certain personal information.
Instead of you guiding the technology, the technology now has the capability to secure proof that you are truly who you say you are.
Could biometrics save us from future debacles of the Flooz.com variety? Let’s hope so. Only tougher, newer technologies can trounce antiquated technology. And not a moment too soon if the public is ever expected to accept online shopping as part of its lifestyle.
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.