Credit Card Fraud

8iatch

Hi Folks
Having been a victim of credit card fraud this month I would like to know why those merchants who are on the repeat offenders list for credit card fraud are not made to improve their credit card checking during online or telephone purchases


I have just been affected by, what I have been told by my Credit Card issuer, two of the most frequently defrauded merchants. They are well known to the fraud teams as two of the most common offenders and easy to commit credit card fraud with so why are they not doing more to protect their consumers?


Perhaps this is something that now must be highlighted and these organisations who sell high value items should be made to tighten their checkout processes so the consumer is not adversely affected by their incompetence!

grumbler

8iatch wrote: »

...I would like to know why those merchants who are on the repeat offenders list for credit card fraud are not made to improve their credit card checking during online or telephone purchases

Because extra security costs and it's their choice.
Ultimately, it's the offender who pays when fraudulent transactions get charged back.

E.g. O2 (PAYG topups) is one "of the most frequently defrauded merchants".

eddddy

It's usually a straightforward business decision. A simplified example of a company's thought process might be:

If we have really extensive security checking...
- we will cut the fraud rate to just 1%
- but all the checks will annoy our customers, and 20% of our customers will go to competitors who don't have annoying security checks

If we have minimal security checking...
- we will have a fraud rate of 10%
- but we will not annoy any customers and lose them to competotors


So the high fraud rate is actually more profitable to the company.

---

Edit to add...

And this why the police are often not keen to investigate plastic card fraud. Some businesses choose to allow high levels of fraud in order to maximise their profits, so why should the police 'tidy up the mess' resulting from the business's choice?

grumbler

http://en.wikipedia.org/wiki/3-D_Secure

The advantage for merchants is the reduction of "unauthorized transaction" chargebacks. One disadvantage for merchants is that they have to purchase MPI (merchant plug-in) to connect to the Visa or MasterCard Directory Server. This is expensiveI][URL="http://en.wikipedia.org/wiki/Wikipedia:Please_clarify"]clarification needed[/URL][/I (setup fee, monthly fee and per-transaction fee); at the same time, it represents additional revenue for MPI providers. Supporting 3-D Secure is complicated and, at times, creates transaction failures. Perhaps the biggest disadvantage for merchants is that many users view the additional authentication step as a nuisance or obstacle, which results in a substantial increase in transaction abandonment and lost revenue.

molerat

Any theft or fraud is assessed as a normal running cost of business. All running costs are assessed and ways to reduce that cost looked into. In many cases the cost of loss prevention is greater than the loss itself.

chattychappy

These days it's not quite as simple as being a business decision.

The FCA has a statutory objective of reducing financial crime. Governments, rightly or wrongly, worry about terrorist financing and the other effects of fraud. The FCA imposes an obligation on firms to have the systems and controls in place to minimise the risks.

An example is all the money laundering stuff. If it was purely a commercial decision, firms probably wouldn't bother with half of it.

No doubt in time the networks (Visa/Mastercard etc) will start being fined for failing to act in the case of systematic use of their systems for fraud.

teffers

eddddy wrote: »

It's usually a straightforward business decision. A simplified example of a company's thought process might be:

If we have really extensive security checking...
- we will cut the fraud rate to just 1%
- but all the checks will annoy our customers, and 20% of our customers will go to competitors who don't have annoying security checks

If we have minimal security checking...
- we will have a fraud rate of 10%
- but we will not annoy any customers and lose them to competotors


So the high fraud rate is actually more profitable to the company.

---

Edit to add...

And this why the police are often not keen to investigate plastic card fraud. Some businesses choose to allow high levels of fraud in order to maximise their profits, so why should the police 'tidy up the mess' resulting from the business's choice?

This.

I previously (2001) worked in the Credit Card Fraud Prevention unit for a large (now out of business) electrical retailer.

It was a business decision based purely on loss vs cost vs income.

When we discovered a fraudulent transaction we weren't even informing the card issuer, let alone the card holder :eek:.

This would often lead to multiple further attempts of orders using the same drop address / card details etc.

We just cancelled the order and moved on. Pretty disgusting really. Business is business