Cyber sentinel: can e-commerce in Latin America be made safe? Argentina's Decidir.com believes its information protection and fraud screening services

ESTEBAN NOFAL HAS AN ambitious mission: He wants to make Latin America safe for e-commerce. That's no small goal. Latin America's emerging Internet industry has been saddled with the regrettable reputation for being the Wild West of the Web, in which merchants or consumers often wind up eating the cost of orders purchased with fake or stolen credit cards.

Nofal's 2-year-old company, Decidir.com, sells secure payment and identity verification services to online retailers in Argentina, Brazil, Chile and Mexico. Decidir's service works like this: When customers complete a transaction on a retailer's Web page, the payment is routed by the company through a secure platform. Employees use that platform to verify buyers' identities. Companies can also check credit histories and ability to pay.

"We're taking the risk out of online transactions in Latin America," Nofal, 34, says. "E-commerce wasn't going to happen in Latin America until someone figured out how to do secure payments and identity verification."

Certainly, Decidir's service is one whose time has come. Online retail sales are expected to top US$580 million in 2000, according to an October study released by Boston Consulting Group and Visa International. "[T]he industry must persuade users to adopt some kind of security system and to trust the merchant and banking system enough to share credit card information over the Internet," the report says. It goes on to highlight a Decidir prototype--a "password system of personal questions that only the owner of a particular credit card can answer"--which is still under development.

Merchants currently pay Decidir.com between US$500 and US$700 in set-up fees, and between US 30 cents and US 90 cents per transaction. Among Decidir's clients are auction sites, the region's hottest e-commerce submarket, which was expected to generate US$192 million in 2000. One virtual auction house, DeRemate.com of Buenos Aires, outsources its online payments in Argentina to Decidir, which in turn deals directly with credit card issuers. Buyers' information is encrypted to reduce the chance of fraud, says DeRemate executive Jose Luis Bosch. "Computer users in Argentina fear fraud, and there's a myth of insecurity in e-commerce that's difficult to change," he says. "This system offers them security."

Privately held Decidir, based in Buenos Aires, has 200 employees and is growing fast. Revenue is expected to increase ten fold from US$400,000 in 1999 to a projected US$4 million in 2000. While the company is still losing money it expects to post profits by the end of 2001.

When the company launched in early 1999, its first goal was to become Latin America's largest provider of credit information to small-and medium-sized companies. While North Americans take for granted the ability to quickly and easily check customers credit, such information has been costly and difficult to find in Latin America. Typically, only large firms keep credit databases. Smaller merchants have been at the mercy of the marketplace, which lacks consumer and anti-fraud protection laws. So Decidir cobbled together databases from public records, building lists that include 70 million companies and individuals in Brazil and 58 million in Mexico.

Customers pay for the service either by subscribing for US$100 a month or by paying US$30 to US$70 per credit check. All of the information is provided online, and for many small- and medium-sized businesses, signing up with Decidir is their first Internet experience. "We want to bring credit awareness to the masses," Nofal says.

So far, investors like Decidir's model. The dotcom has raised US$21 million in two rounds of venture capital financing. Backers include North American firms Citicorp Venture Capital Latin America, GE Equity and SCP Private Equity Partners.

Nofal, who has a large stake in the company was behind the first round. Two venture funds he controls, Latin Internet Ventures Ltd. and CIMA Consulting Ltd., invested US$2.9 million. A native of Argentina and former Morgan Stanley salesman, Nofal was in the midst of launching his own asset management business when he decided to invest in Decidir.com. He took over as Decidir's chief executive last May Founder Esteban Brenman is chairman.

In its second round of financing in September, Decidir raised US$15 million. A quarter of that money came from Citicorp Venture Capital Latin America. Brian Kim, a director of the fund, likes the company in part because it addresses a problem unique to Latin America. "A lot of these companies try to take a US [businessi model and apply it to the region," Kim says. "This is really a home-grown company"

SCP Private Equity Partners of Wayne, Pennsylvania, found the ecommerce site's business plan promising enough to make it the only Latin American firm in its portfolio. SCP saw several Decidir strong points. It's a business-to-business (B2B) e-commerce company While the stock values of several high-profile B2B firms have plummeted recently on the NAS DAQ, venture capitalists still prefer these companies to those that sell goods and services directly to consumers.