Security and Human Behaviour 2010

1. INTRODUCTION The growth of the Internet has been enabled by rapid technological developments. Specifically for electronic commerce, there is pressure on financial systems to adapt to the increased volume of spending taking place over the Internet. Until now, most buyers have used credit arrangements or checking accounts as the principle means of paying for Internet purchases. For Internet transactions, a range of electronic solutions including electronic cash (ecash) are proving to be potentially superior substitutes for conventional monetary instruments. Significant problems have emerged however because alongside the positive innovations, significant abuses have grown concomitantly including antisocial behaviour and security/privacy abuses, e.g. spam attacks, phishing and identity theft. In preventing fraud, the virtue of traditional cash is its anonymity, security and lower transactions costs so in amelorating problems of fraudulent collection of personal financial information during electronic transactions, at least theoretically and technically, systems such as e-cash can be developed to harness the lower computational and/or transactions costs of electronic payments schemes whilst retaining in electronic cash the virtues of conventional cash (e.g. in terms of security and anonymity). Hypothetically at least, the potential security of virtual money could be greater than that of conventional money given the sophisticated printing and counterfeiting methods used for conventional cash. In practice however, governmental constraints have meant that adoption of tamper resistant technology is limited, e.g. for e-money by the US export limits on long /complex keys (Swire,1997). Many existing e-cash systems, particularly those that can be used with a number of different merchants, are not completely anonymous because the monitoring of their use is actually essential to the proper operation of these systems in order to prevent the double spending of virtual coins. This monitoring may be very costly requiring collusion between institutions. The use of a conventional cash system allows direct interaction between buyer and seller and so it is not possible to monitor transactions taking place mediated using conventional cash. Anonymity is ensured. Conventional cash will be preferred by those involved with criminal activities as long as criminals and tax evaders believe that electronic transactions will always leave some trace (Goodhart, 2000). It can be argued that complete anonymity is not desirable from a social welfare point-of-view (de Solages and Traore, 1998). In theory, a system of anonymity that is only revoked by some trusted authority when criminal activities take place would mean that criminal activity could be more effectively …