Sunday, October 30, 2005

Acceptable Risk as a euphamism for shifting fraud liability to the consumer

Financial Cryptography: "Acceptable Risk" - a Euphemism for Selling Fraud?

This is a post from a while back but is still relevant to recent discussions about how the financial industry is still shifting the burden of identity theft and fraud to the customers. Bruce Schneier just wrote about this in regards to phishing in the most recent edition of Crypto-Gram as well.

The "acceptable risk" concept [writes guest financial cryptographer Ed Gerck] that appears in recent threads has been for a long time a euphemism for that business model that shifts the burden of fraud to the customer.

The dirty little secret of the credit card industry is that they are very happy with 10% of credit card fraud, over the Internet or not.

In fact, if they would reduce fraud to zero today, their revenue would decrease as well as their profits. So, there is really no incentive to reduce fraud. On the contrary, keeping the status quo is just fine.

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