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Card Fraud Brings Out The Crazy Ideas

The number of overly complex solutions being proposed for payment-card fraud keeps increasing, even though the industry already knows how to solve the problem, according to security blogger Brian Krebs.

Krebs points to one would-be solution that uses geolocator software to track the point-of-sale device where a card is being used and its distance from a cardholder’s phone (“Lost-and-stolen fraud is minuscule compared to losses from other types of fraud,” Krebs notes) and another that directly notifies police when a stolen card is used (“Cops generally have more important things to do than chase around the street urchins who end up using stolen credit and debit cards”).

He also pokes fun at the Dutch researchers who recently proposed using quantum physics for card authentication. (In fairness, most reporters would never even glance at a scientific paper about quantum physics, so using card fraud to get their attention clearly worked.)

But most U.S. banks have yet to roll out a simpler and cheaper antifraud solution: EMV chip cards. According to a payments-fraud survey released this week by the Federal Reserve Bank of Minneapolis, “signature debit transactions are the payment type cited by the largest number of financial institutions as accounting for high levels of payments fraud losses (92 percent of financial service companies).”

As for spending more on pricier antifraud solutions, the Minneapolis Fed report found that “high percentages of surveyed financial institutions report that fraud prevention costs exceed actual losses for many types of payments, especially wire, cash, and ACH payments. This trend is even more striking for non-financial respondents. In every payment category, a higher percentage of such firms responded that prevention costs exceed fraud losses.”

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