New IBM Software Lets Consumers Shop Online AnonymouslyNew IBM Software Lets Consumers Shop Online Anonymously

In the latest effort to stamp out the multibillion dollar problem of identity theft and electronic fraud, IBM said Friday it has created software that allows consumers to shop online without revealing key data like their credit card or social security numbers -- or in some cases even their name.

With IBM's Identity Mixer security software, consumers wishing to purchase an item online can obtain an encrypted software 'token' from their bank or credit card company. The encoded token would confirm that the consumer has the necessary funds for the transaction, but would not reveal specific financial details or personal data to the merchant. The merchant would then reconcile the transaction with the bank, which would have to have software that works with Identity Mixer.

The set-up could also be used by consumers wishing to prove to an online site that they are of legal age without actually disclosing their birth date. "The merchant would know you are old enough to enter their site, but nothing else," says Jan Camenisch, a researcher on the project at IBM's research lab in Zurich, Switzerland.

IBM has released the technology to the open source software community through the Higgins Project -- an industry wide effort sponsored by The Eclipse Foundation to create privacy technology based on open standards.

It will be up to commercial developers to use the technology to create consumer-friendly tools, such as browser add-ons, that embed Identity Mixer. "It's not going to be too useful to consumers until someone comes along and builds a usable product that also has some major banks and merchants behind it," says Mike Neuenschwander, an analyst at Burton Group.

There's also the question of whether online retailers will invest in the back-end computer technology required to accept the tokens. Camenisch thinks they already have a strong incentive to do so. "Having this system in place will limit their liability in the event of data loss," he says.

Microsoft is developing its own so-called user centric privacy protection software, raising the question of whether consumers will be faced with a VHS/Betamax issue when it comes to choosing security tools for online shopping. Microsoft's Vista operating system offers a feature called Cardspace. It can be used to create virtual cards on the desktop containing varying amounts of personal information depending on the intended use.

A Cardspace user can create a card that stores the minimum amount of data required for, say, signing up for an online auction site. Clicking on the card initiates the transaction. "The question is to what extent Microsoft will incorporate the open standards into their own technology," says Neuenschwander.