First Atlantic Commerce has announced it is to use a kind of card verification for customers buying over the Internet which is expected to reduce e-commerce fraud by 70 percent.

The system, called cGate SecureVerify, will allow Visa and MasterCard holders to sign up and have a password which they can use when buying goods or services on-line.

"It is the next best thing for authenticating to actually having the card holder doing the transaction in front of you," said Andrea Wilson, chief financial officer of FAC, a Bermuda e-payment facility.

"It is like a handshake for electronic transactions between the Internet merchant and the cardholder's bank."

Now merchants using the Internet can sign up with FAC to get the service, which will simply to the verification process or also process the payment.

Called the 3-D Secure Payer Authentication, Ms Wilson said that for the first time this technology actually protects both merchants and acquiring banks from fraudulent transactions, charge backs and unauthorised payments.

"Before there was no way of validating that the person who said he was John Smith actually was John Smith on the Internet," said Ms Wilson. "This way the consumer will have a pass code box that will pop up when paying for say, books at Amazon.com. And only John Smith will know his own pass code."

Ms Wilson said that banks using this method can notify their customers to either go on-line to pick an alpha-numeric (using words and numbers) password or go into a branch.

Then merchants and banks can sign up to the system, which will allow them to make sure the person paying with the credit card is the same as name on the card.

FAC has taken six months to install and work out this back end payment system associated with the new technology and they will, for a fee, process the password verification and or the payment.

"The vendor would have to pay upward of $135,000 for the software. Then there is implementing it and figuring out what to do with it and the testing associated with it," said Ms Wilson. "And that took us six months and we are used to this being in the back-end payment process side."

FAC is offering the system as a "pay as you go" service and payment authentication and payment itself can be bundled together as a package. "The solution will vastly improve the payment service for e-Commerce merchants, consumers and bankcard acquirers by enhancing consumer confidence, lowering credit risk and charge backs, and reducing up to 70 percent of fraudulent transactions on Internet transactions," said Ms Wilson.

FAC will host the 3-D Secure software on behalf of both the merchant and the acquirer, so there is no software to purchase, license, or certify, by either the merchant or the bank said Ms Wilson. "The convenience of a fully outsourced 3-D Secure solution allows acquirers and merchants to implement payer authentication services rapidly, and upon request, resulting in immediate reduction in card fraud, interchange fees, charge backs and card Association penalty fees," added Ms Wilson.

First Atlantic was set up in 1998 to create secure card-based payment solutions for e-businesses. It now provides technology designed to work with most merchant platforms.