It is estimated that, in the US alone, the value of products and services traded on the Internet will be $8 billion this tear and will grow to $327 billion in the year 2002.
Not that this is proving any kind of spur to Israeli credit companies. They are late on the scene. Visa, for example, announced in Israel this week that it had signed an agreement for installing an electronic security system which will make it possible to make credit card transactions on the Internet.
Visa ICC general manager Zvi Meshi says that once ICC, CMS Computerisation and Media Systems (HP representatives), Caspit (Verifone representatives) and Microsoft Israel implement SET (Secure Electronic Transaction) standards, large scale, secure trading on the Internet will become possible, both for Israeli consumers making purchases around the world, and for Israeli businesses wishing to sell in Israel and internationally. Meshi estimates that when ICC implements the standard in Israel, secure purchases by Internet in Israel and from Israel will reach a level of NIS 3 billion by the year 2000.
Although the new standard has been bandied about for at least a year, ICC will embark on pilot testing of SET only in the first half of 1998, for a group of customers and businesses. The pilot will test applications unique to Israel which will facilitate uniquely Israeli installment transactions, such as Visa Credit, on the Internet. The pilot program will last several months, and, towards the end of 1998, the Internet will be open, as far as they are concerned, for secure trading for all businesses, suppliers, and card-holding customers in Israel who are interested.
At the same time, Visa announced that it will not honour transactions made by Israelis on the Internet until this system gets under way. The following is the wording of the notice: "Visa ICC wishes to inform its customers that they should not disclose details of their Visa cards for the purposes of making transactions via the Internet, as the information may leak to people who are liable to make irregular use of it. In this way, unnecessary inconvenience and financial damage will both be avoided. Of course, it is still possible to order via telephone, fax, and mail, but we regret that orders may not be made via the Internet."
Visa ICC spokesperson Yifat Fleischer: "We published a recommendation to customers not to make transactions on the Internet, because a system not secured with the SET standard can do a great deal of damage. For example, a few weeks ago, the details of a single credit card belonging to an Israeli, which were transmitted for the purposes of making a small purchase, were replicated 2,500 times by someone who tried, through counterfeiting, to make purchases on a huge scale. We cannot forbid this, but we recommend against it, because the Internet is a platform for counterfeit, and even if Israeli law obliges us to back these transactions, it is not worthwhile for the customer."
Adv. Haim Ravia, an expert in Internet law, explains why this notice is problematic: "The notice is formulated as an imperative, while the spokesperson says it is only a recommendation. The wording is therefore liable to be misleading, such that card-holders will mistakenly believe that Visa ICC does not honour payments made via the Internet.
Pioneer owners of Internet businesses in Israel are perplexed and angry. The information distributed by Visa to both customers and suppliers is confusing, and causes unnecessary alarm. More than that, this is a spanner in the works of electronic trading that in any case began to get going significantly later here than in the rest of the world. Saar Blitz of ExcellNet, which operates a virtual computer store which has been in business for eighteen months, and allows on-line credit card purchases: Visa took sweeping measures that made people extremely scared. To order a pizza by ‘phone is a great deal riskier than Internet stores. In fact, we make 7-10 sales a day by Visa. Visa hasn’t talked to me about such a ban, and it’s clear to me that it is illegal; the Internet is a telephone transaction in every respect."
Because of the restrictions, Yariv Nahshon of Plonter, another virtual store, still takes the precaution of taking details by telephone and issuing a customer number: "For some time now, Visa has been delaying approvals for Internet businesses, but their latest announcement to customers and suppliers seems to me quite illegal, and bordering on a restraint of trade. Even if I get their approval, people are more scared. This doesn’t just hit me as a supplier. They are spiking virtual shopping and technological progress in Israel."
Visa deputy general manager for security and approvals clarifies the picture, which is one sided and unambiguous: "We came across the phenomenon that counterfeiters tried, through Internet channels around the world, to check the genuineness of credit cards for the purposes of forgery and theft. This happened to IBM, among others, and IBM is an international supplier, not Israeli. We took a difficult decision, and blocked the Internet in the Visa International system with which we work. The consequence is that suppliers of services around the world who honour Israeli cards and request a confirmation - encounter a refusal. If the confirmation request comes to us and is identified as an Internet request - it is blocked. If a supplier does not check a traffic confirmation before it is received, it is sent to us in the records via normal Visa channels, and so it will be honoured as a normal transaction. Suppliers in Israel who consult us will receive a negative response. On the other hand, if they request transaction confirmations by telephone and don’t stress that the sale was made via Internet - the will receive permission. We will invest the necessary resources and find out who in Israel abuses this permission, and we will block them, we will simply cancel contracts with suppliers."
Adv. Ravia however says; "A transaction made on the Internet by means of a credit card, termed charge cards in the law, is a transaction lacking documentation, meaning a transaction between the customer and the supplier in which the credit card was not presented. The law stipulates that, in the case of a transaction like this, the customer can notify the credit company within thirty days of receiving an account statement that he did not execute the transaction, or did execute it but for a different sum from that with which he was charged, and in that event the company’s obligation is to return the money to him within fifteen days. It makes no difference where the transaction occurred, in Israel or overseas, by fax or via the Internet."
Published by Israel's Business Arena January 28, 1998