A new piece of software introduced Monday by a San Diego firm could have a major impact on electronic commerce in the coming years.
While buying the latest book or CD online is quickly becoming a common convenience, Web-based merchants are increasingly worried about the potential for credit card fraud -- which more often than not leaves them holding the bag.
HNC Software, which sells its extremely popular Falcon fraud-detection software to banks and other card issuers, thinks it may have the answer. Its solution has been to tweak its Falcon product for use by Internet merchants, who can use the software to target more accurately transactions likely to be fraudulent.
The Falcon software already is used by several large banking institutions nationwide, tracking some 260 million credit card accounts, according to the company.
If it works as promised, the new product, known as eFalcon, could be a godsend to online businesses. In a "normal" credit card transaction, such as when a customer hands over a card to a clerk to make a purchase, the card-issuing entity guarantees the transaction and is liable if it later turns out to be bogus.
But in transactions were no card is seen, such as telephone orders and Internet sales, it is the merchant who is responsible for the loss, should one occur. It is also more difficult in these situations to gauge the credibility of the unseen buyer. Some merchants employ rule-based systems, which examines buyers based on a few criteria, to screen out some of the questionable sales. But according to HNC, this approach is often too broad to work effectively in an e-commerce system.
"A human being can keep track of about three characteristics themselves," said Allen Jost, vice president for business development at HNC. "By contrast, the regression-modeling systems that we use can keep track of hundreds of thousands of characteristics to assemble a profile."
The software works by assigning a score to various details available on the transaction. For instance, has the person surfed around the online store for a while, or have they gone straight to their selection to make a purchase? Are the items being sold easily sold on the black market? Are there numerous quantities of the same item being sold?
Like Falcon, HNC will get a small fee per transaction with eFalcon. The company is prohibited from using the extensive data it collects for other purposes, like selling it to other marketers, Jost said.
Although the company has not put out specific sales targets, the eFalcon line could help to rejuvenate the company's bottom line, which saw some damage recently because of falling sales in its insurance/risk management line. For the first quarter, HNC posted revenues of $49.2 million and earnings of $2.1 million, or 8 cents per share, compared with Wall Street's expectations of 22 cents per share. The results were blamed on several factors, from expansion of operations to slower software buying by companies because of the impending Y2K event.
E&Y Entrepreneur Awards
Accounting firm Ernst & Young LLP announced Monday their list of finalists for San Diego's 1999 Ernst & Young Entrepreneur Of The Year awards.
The winners will be announced on June 10 during a ceremony at the Hilton La Jolla in Torrey Pines. The 24 finalists are divided into eight categories:
For the Life Sciences category: Peter Johnson of Agouron Pharmaceuticals; Timothy Rink of Aurora Biosciences Corp.; and Tina Nova of Nanogen.
For the Consumer Products/Retail category: Mike Spacciapolli of Carbite Golf Co.; John Sarkisian of Oscar's; and James Fitzpatrick of San Diego Magazine Publishing Co.
For the General category: George Haligowski of ITLA Capital Corp.; Gerald Benowitz of Newgen Results Corp.; and Bob Blumberg of SMS Technologies.
For the Real Estate and Construction category: Daniel Epstein of ConAm Management; William Gerrity of GMS Realty LLC; and G. Bruce Dunn of Mission Pools Inc.
For the Software/Internet category: Jorgen Lien of Blue Sky Software Corp.; Christopher Crane of Comps.Com; and Harry E. Gruber of InterVu Inc.
For the Telecommunications category: David Rickey of AMCC; Mark Dankberg of ViaSat Inc.; and Massih Tayebi and Masood Tayebi of WFI.
For the Young Entrepreneur category: Amy Vavrunek of Accent Presentations Inc.; Richard LaChina of AXXIS Computer Technologies; and Shawn P. McEachern of Inflatable Design Group.
For the Master Entrepreneur category: Joseph C. Larson of Cardiff Software Inc.; William Stensrud of Enterprise Partners; and Harvey White of Leap Wireless International.
Winners selected from these finalists will be eligible for 12 national Entrepreneur Of The Year category awards, as well as the National Entrepreneur Of The Year, which will be announced at the Ernst & Young Entrepreneur Of The Year International Conference in Palm Springs on Nov. 13.
The San Diego finalists were selected by an independent panel of judges, which included: Bob Beyster, CEO and chairman of the board of SAIC; Allan Camaisa, president and CEO of High Technology Solutions; Sandy Ehrlich, executive director of the Entrepreneurial Management Center at SDSU; Anne Evans, chairman of Evans Hotels; Bill Otterson, director of UCSD Connect; Bill Rastetter, president, chairman and CEO of Idec Pharmaceuticals; Ralph Rubio, president and CEO of Rubio's Restaurants Inc.; Gary Sabin, chairman and CEO of Excel Legacy Corp. ; and Julie Meier Wright, president of the San Diego Regional Economic Development Corp.