PayPal snaps up Fraud Sciences

29-01-2008

by Stephen Errity

PayPal, the online payments division of auction giant eBay, has acquired an Israeli online fraud detection company in a deal worth USD169 million.

Fraud Sciences has developed software to differentiate between genuine and fraudulent online transactions, technology that will now be integrated into PayPal's services. Senior staff at the Israeli start-up will take up positions on PayPal's fraud management teams, while the company's merchant programme, with over 200 clients, will be closed down as it focuses exclusively on PayPal.

eBay has said the acquisition of Fraud Sciences would not impact on its 2008 financial guidance, issued last week with its latest set of financial results.

PayPal has long been a target of online 'phishing' scams, where fraudsters set up fake versions of the site's homepage and trick users into entering their login details, thus capturing data and giving them control of accounts.

The company recently began offering a second layer of security to customers in the form of a one-time numeric passcode to be entered alongside the usual login details. The passcode expires in thirty seconds, making for a greatly reduced window of opportunity for fraudsters to gain control of an account.

PayPal has also lobbied for free e-mail providers such as Microsoft's Hotmail and Google's Gmail to block e-mail sent without the use of digital signatures. This would potentially mean fewer scam e-mails would reach inboxes, reducing the chance of fraud, although providers have yet to make a unified commitment on the matter.