Credit card fraud – why does it still exist?

This evening I discovered that one of my credit cards had been used fraudulently for the third time this year. Bad luck for whoever it was (presumably) online shopping at various retailers, apparently all the charges were automatically declined. I hope they gave a real mailing address :-). I maintain a hierarchy of exposure and this card happens to be the most exposed but still. It cannot be beyond the wit of man or woman to solve this problem. So why hasn’t it been solved?

I guess the answer is obvious – economics. No doubt credit card companies can estimate their losses to fraud in any year. Actually, I am not sure who carries the losses – retailers or the credit card company – but I guess it is the same in the end. Presumably the calculation goes like this: if the loss from fraud is less than the loss of business from tightening up use of credit cards to prevent fraud, let’s live with fraud!

Credit card fraud is one of those “victimless” crimes. I am not exposed to fraudulent charges as long as I cannot be shown to have been negligent (I guess). Whoever ends up swallowing the loss must think that it’s worth it. Retailers want to reduce the friction to sales as much as possible. Implementing secure credit card technology would no doubt be a massive increase in friction, opening the door to other forms of money transfer (Bitcoin anyone?).

Oh well. The only strategy that makes sense is to use cards in a hierarchy of risk where the card used in the riskiest situations is never used for regular payments otherwise you end up constantly going around websites updating payment information every time some idiot uses a stolen credit card number. But this shouldn’t be necessary – it’s plain wrong to accept crime as inevitable, especially when it can be prevented by technical means.

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