The company said the system, which is based on Microsoft Visual Studio.net software, is "the most exciting advance in the detection of retail crime since CCTV", according to Martin Wilkinson, profit protection manager at the company.
All point of sale transactions in M&S' 312 UK stores are monitored by a VS.net based "listening system" which queries purchases, expressed as XML, against a set of user-defined rules, such as specified amounts or stolen credit card numbers.
Suspect transactions are identified by comparing patterns of buyer behaviour and mapping receipts from individual cash registers with information in M&S' datawarehouse, which is analysed on a 24x7 basis.
Once a suspect transaction is identified, an SMS alert is sent, via a specially developed VS.net service, to store security and managers' mobile phones. The process takes about 30 seconds.
Fraud cost the retail sector an estimated £53.7m in 2000, a 68% increase on 1999's figure, according to the British Retail Consortium. As one of the UK's largest retailers, it was inevitable that M&S would suffer from this rise, said Wilkinson.
"We serve 10 million customers per week and the vast majority of our customers pay, but there is a small minority that do not," he said. "This system will help us reduce our exposure to till point fraud by 10%."
M&S used the project to work out how it should be using Microsoft's .net architecture in the future.