Monday, August 31, 2009

Fraud Necessitates the Need to Track Consumer Credit Card Purchases

<p/> Credit-card companies track your purchases to make sure you and they aren't scammed


Sunday,  August 30, 2009 3:42 AM
THE COLUMBUS DISPATCH
Pat Kastner | Dispatch illustration



At noon, you use your credit card to pay for gas at a station in Columbus. An hour later, your card has been used to buy a $1,500 computer -- at a store in Moscow.



Before the charge is approved, a sophisticated computer-monitoring system thousands of miles away raises a red flag, denies the charge and keeps you from becoming the victim of a crime -- all in a matter of seconds.



Such technology used behind the scenes to thwart criminals has become the norm in the ever-evolving, techno-savvy and secretive world of credit- and debit-card security.  It's a world filled with sophisticated and well-organized bad guys determined to steal your identity and card information -- and equally determined card issuers and networks bent on stopping them.



The card industry includes financial institutions such as Huntington and JPMorgan Chase, which issue credit and debit cards that are serviced by electronic payment networks. The two biggest are Visa and MasterCard.  Discover and American Express also issue and service credit cards.



At stake in their combined fight against criminals is billions of dollars. Identity theft netted crooks about $48 billion in 2008 in the United States, a 16 percent increase over 2007, according to Javelin Stategy & Research.





Of this total, about $22 billion was realized from fraud connected to existing cards.



Most cardholders have zero liability for fraudulent activity, so the fraud is likely to cost them mainly time and inconvenience.   Editor's Note: So that balance between security and convenience is what again?...and whose convenience?  It seems to me that if $22 billion worth of fraud creates "monetary loss" and "time and inconvenience" for consumers, that we need to re-evaluate that balance.  Yes?  That's without considering the fact that consumer privacy is past-tense now that every purchase is "tracked."  Why not process (E2EE) transactions the "right" way instead?





Instead, the card industry and merchants are on the hook for all those billions, which is quite an incentive to limit their losses. The card industry doesn't like to discuss the details of how fraudulent card activity is monitored and detected.  "If they became public, they wouldn't be effective. It would only aid the fraudsters," said American Express spokeswoman Lisa Gonzalez.



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