That merchants hold almost 100% of the liability for fraud even if they do everything "right" to vet a transaction is crazy to me. The other parties (issuing bank, payment processor, payment network) are in a much better position to combat and detect fraud, since they see ALL the transactions. But the incentive to do better is low, since the merchant not only holds the bag, but sends them a penalty fee.
Disputes are not always fraud on customer side and it’s really not the job of the bank to figure out who is wrong. Imagine two wallets disputing the fate of a coin on a bazaar - does it really make sense? E.g. if content of the package is stolen at warehouse or something else happens, where you think you sent the product and customer got nothing, customer may dispute your point of view and request chargeback. There’s no easy universal answer here, so it’s better to look at it in a constructive way and factor the risks into the price. Of course, bank or payment processor can offer an insurance product in this case and include this risk in price of transaction instead of collecting the fees. But this is just a game with financial models and putting labels.
Agreed, though the other 3 parties know a lot more about the customer, past disputes, and so on.
Also, the argument applies for any kind of chargeback. Again, the other three parties combined see all transactions and have lots of context. And, if they required things like ip address, shipping address (they only ask for billing), they could really improve fraud detection. But they don't...there is an incentive problem.
This is convenient for merchants to offload fraud prevention to banks by sharing more data, but then this should be a service for which you pay and a section in your privacy policy, so that your customers know which data is shared with the bank and why (I‘d say that would be too much data). Fraud levels are different for different merchants, so bundling this service with core product would be unnecessary tax for those businesses which rarely deal with fraud.
