Legal boost for mobile e-commerce: Security strategies accelerated by E-Sign law

Wireless e-commerce, hobbled by security concerns, has not had much momentum in the U.S. 724 Solutions and Certicom want to change that. Inspired by the June passage of the Electronic Signatures in Global and National Commerce Act by the House of Representatives, the companies have collaborated to push a public key infrastructure solution to financial institutions. Though the E-Sign Act protects all e-commerce transactions, one side benefit could be to help mobile e-commerce gain further acceptance.

The E-Sign Act, which goes into effect in October, states that electronic financial transactions between a consumer and a merchant - typically a content provider - will be legally bound with digital signatures. Digital signatures authenticate users that enter into contractual agreements via electronic means, through wired devices or Internet-enabled wireless devices.

The act gives some assurance to consumers who have been skeptical of security for e-commerce.

"The E-Sign law was the missing component that people have been waiting for," said Prakash Panjwani, director of wireless for Certicom. "It gives validity to what we have been talking about for a year or two."

The E-Sign Act was passed just as merchants realized that wireless e-commerce could be another revenue source. In turn, wireless carriers will gain additional revenue as merchants increasingly conduct business wirelessly.

E-commerce transactions might be more conducive to the wireless Internet than Web surfing, which is cumbersome on small devices. "People are using wireless devices more for high-value transactions because they are not going to browse the Web," Panjwani said. "Because of this, they need a higher degree of security than over the wired Internet."

The passage of the E-Sign Act is at the heart of Certicom's recent agreement with 724 Solutions, Panjwani said. Together, the companies will provide financial institutions with a PKI solution to allow consumers to digitally sign high-value transactions such as mortgage agreements, brokerage accounts, insurance forms and credit card applications.

724 Solutions provides its services platform to financial institutions, and Certicom integrates the platform with its wireless security technology. The package allows a bank or other financial institution to connect its services to mobile devices.

The law protects all parties involved in an e-commerce transaction. "There was no compelling reason to implement a PKI solution until the E-Sign Act was passed," said Ian Hobbs, vice president of product line management and access for 724 Solutions.

"Banks have been worried when they get an electronic request that it is not coming from the appropriate end user," Panjwani said.

They have had reason to worry. Fraudulent e-commerce transactions comprise 5% to 25% of all e-commerce transactions, Hobbs said. "Banks have brand recognition and trust, so they have been cautious to do anything that might damage that trust."

The 724 platform will be available by the fourth quarter. Hobbs anticipates an increase in wireless carrier interest as financial institutions begin to extend their wireless service offerings.

"Carriers are looking to step into new revenue-generating models," Hobbs said. "PKI is important because it stimulates the adoption of e-commerce. It is growing on the Internet but now is at a pace people want to see. PKI can enable carriers to stimulate higher growth curves."

Panjwani agrees that PKI is gaining more recognition from the carrier world.

"Operators are pushing this because it allows them to provide WAP-based [financial] services to end users," he said. "When we start to see more value-added services like [those] that 724 Solutions offers, then we will see the fruits of wireless financial applications."

There will be more WAP-enabled phones coming to market in the next few months, he predicted.

"The reality of wireless e-commerce will hit when we see more services in the market," he said. "The E-Sign law was the biggest boost lawmakers could have given it. It is the part that was missing."