Online merchants may be understating the amount of fraud and customer complaints to avoid scaring off consumers and investors, say officials at MasterCard International and Visa International. Internet purchases accounted for about 1% of MasterCard transaction volume last year, and that will double or triple this year, says Arthur D. Kranzley, senior vice president of electronic commerce and emerging technologies. While not providing details, Kranzley says disputes are disproportionately high on Internet transactions. And, he adds, "The rate of disputes is increasing at a faster rate than volume." Visa also declines to provide details on Internet fraud and disputes. But a one-month survey in late 1998 by 15 Visa members in Europe found that Internet transactions accounted for 1% of volume and 47% of disputes. Needham, Mass.-based TowerGroup estimates that Internet fraud is only 11 basis points, or $11 for every $10,000 in purchases. But Visa and MasterCard officials agree that online merchants play down problems. "Merchants doing business online are reluctant to release fraud numbers," says Joseph L. Chouinard, vice president of electronic commerce at Visa International. "Their business is based on people trusting that their transactions are secure."
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