U.S. Unveils Plan to Shield $10 Trillion Online Marketplace

The U.S. government plans to spend $56.3 million on technology aimed at safeguarding the online marketplace and those who operate in it, including consumers, businesses and government agencies.

“The fact is that the old password and username combination we often use to verify people is no longer good enough,” and leaves Internet users “vulnerable to ID and data theft,” Commerce Secretary Gary Locke said at a conference today in Washington. “Nowadays, the world does an estimated $10 trillion of business online.”

The plan, called the National Strategy for Trusted Identities in Cyberspace, “charts a course for the public and private sectors to collaborate to raise the level of trust” connected to online identities, according to the plan.

The administration will play a supporting role and let the private sector take the lead in developing and operating the network, Locke said.

A $24.5 million Commerce Department allocation in fiscal 2012 goes toward the development of a network of credentials that would allow consumers to prove their identities while conducting online transactions.

The network, called the “Identity Ecosystem” would let consumers use devices such as “software on a smartphone, a smart card, or a token that generates a one-time digital password,” according to a White House statement.

The effort will include pilot programs to help facilitate the development of security devices.

‘Biggest Buyer’

The pilot projects are important to companies because the government is showing a willingness “to come to the market as a buyer,” said Mike Ozburn, a principal at Booz Allen Hamilton Holding Corp. (BAH) who has been involved in the plans.

“What each company knows is that they on their own are not big enough” to start this system, Ozburn said. The government will create the marketplace with the pilot programs, to which it has designated $25 million next year, and then will be the first big buyer of the technology, he said.

“The biggest buyer now said that they’re ready,” he said in a telephone interview.

Some secure identification mechanisms will be ready for consumer use in the next three to five years, with the full system available to “those who choose to adopt it” in 10 years, according to the plan.

“The government will neither mandate that individuals obtain an Identity Ecosystem credential nor that companies require Identity Ecosystem credentials from consumers,” according to the plan.

In 2010, companies lost about $37 billion to online fraud or theft, and 8.1 million U.S. adults had their identities stolen, according to a February report prepared by Javelin Strategy & Research, a Pleasanton, California-based research group.

To contact the reporter on this story: Juliann Neher in Washington at jfrancis31@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net

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