I come from a country where most people don’t have a credit card.
I cannot wrap my head around [this](https://m.youtube.com/watch?v=vmh3_nSR1jU) documentary.
Now I get that credit card fraud *is* a big problem.
But if all you need is the card number to order stuff, and card numbers are so easy to come by as shown in the documentary, then why is not every single criminal in the US running a credit card fraud operation?
It seems super easy and low risk. Get a burner device, order stuff from public wifi, and don’t be stupid about the delivery locations.
In: 548
You don’t want to spend more money securing something, than what that something is worth. The fraud is part of the cost of doing banking.
When the fraud goes up, banks spend more money implementing security. If the fraud is as usual or goes down, it makes no sense to spend more money on security.
Cash also have a high cost of security. Everything from storage, transportation, getting the money into bank account and risk of heists (which was high in the nineties, both in money and traumatized victims).
OP that documentary is from 1992. Banking and Credit Systems have evolved substantially in 30 years. You’re thinking the entire US banking system is still being ran like its the 1980s.
I mean, you also have to remember that this particular scam was from back in the late ’80s and early ’90s.
Banks have gotten *considerably* better at detecting fraudulent charges now, and even for the charges that slip through the total amount of money lost is pretty insignificant.
I got into AI very early in a niche known as neural networks. Basically building giant brains. The only sector to ever really use the tech was banking. They have always had the most sophisticated AI to detect changes in buying patterns. They can guess at at fraudulent activity instantly and shit it down. Really quite impressive.
I used to program anti fraud systems for a CC company actually. There are two main places to fight fraud, at signup (fake accounts or ID theft) or at purchase (stolen card)
In the moments after you swipe your card where the terminal says “authorizing…” or you click “purchase” on a website, a very fast computer system is doing hundreds of checks to make sure everything about the transaction lines up. For example, if your history show you never leave town and make relatively low cost purchases, a very expensive purchase from the other side of the country will be denied and the bank will notify you. These systems are getting more and more sophisticated every year and great pains are taken not to trigger false positives because if your card gets declined too often for legit purposes then you’re less likely to use it. This is one application where “machine learning and AI” aren’t just buzzwords but have a huge practical use case and millions are spent on these systems.
For fake accounts, that is a big problem that costs a lot of money. I know less of the details here but companies buy and sell a lot of data about people and when you sign up for a card the company cross checks things you told them about your identity with information they already know about you from other sources.
Most banks have PCL on their balance sheets. Provisions for credit loss. A concern but the profit from credit sales makes up.
https://www.investopedia.com/terms/p/provision-for-credit-losses.asp
Credit card fraud loss to banks runs about 7 basis points which is less than 1/10th of a percent of the total volume. But banks make 1% interchange (sometimes more) so they make more off the interchange they collect than the fraud they experience. They also push about 50% of their losses back to the merchants so they are not liable.
It’s easy enough to find card numbers and order things anonymously if you’re smart about it. The last point is the tricky one. “Dont be stupid about the delivery locations” is actually very difficult. You need somewhere that isn’t your house but is always accessible to you without being traced back to you, while also not having your packages delivered to other people who will return them or keep for themselves. And credit card fraud is easy to spot so even if you can say rent a location or po box with a stolen identity that isn’t connected to you, you still have to physically show up at that location to collect. And if that transaction is being investigated (suspicious purchases are flagged all the time), the package likely won’t show up at all, or worse there’ll be law enforcement there waiting to see who shows up.
Tldr: All the digital stuff is easy, but the IRL part is risky.
Because every time a card gets used the bank collects a fee.
They make so much money doing fraud really doesn’t make a dent.
Banks have managed to convince people and lawmakers that if someone defrauds them by using a false identity, the person on the ID is the victim and not the bank.
Credit card fraud *is* a huge issue, but the banks call it “identity theft” and make us responsible for it. Learn more [The Seven Minute Rule](https://www.pushkin.fm/podcasts/against-the-rules/the-seven-minute-rule).
Latest Answers