Scammers, spammers, e-grifters -- E. Lee Falls has encountered them all, and he has the bruises to prove it. Falls is CEO of Electracash, a Long Beach (Calif.) company that processes checks for e-merchants. That means he handles payments for a chunk of the 20% of Web shoppers who choose not to put their credit-card numbers online every year. Electracash processed 1.2 million payments in 2002, and Falls says 5% to 10% of them came from cheaters and crooks.

His problem, which lies at the root of e-commerce, is simple: Neither he nor anyone else can identify the person making a purchase on a distant computer. Passwords and PIN codes can be stolen, or even guessed. Know what the most common password is? PASSWORD. For PIN codes it's 0000, followed by 1234.

In an e-commerce arena with such flimsy defenses, fraud is inevitable. It raises costs for the industry and scares away consumers. Falls, whose five-year-old company booked revenues last year of $1.6 million, says his outfit and the industry would be far bigger if they could just verify who their customers are.

[ Read more ]