I've thought about this "problem" and decided there's no problem. You're solving a non-problem if you try to solve credit card fraud.
The reason we don't deal with credit card fraud is that there are no consequences for being a victim, for any definition of victim. If the victims had consequences, then there would be demand for action. But there is none. Further, because there are no consequences, the cost to solve credit card fraud isn't worth it.
Edit: This is a true statement. I feel capable to comment on this topic and have spent time working with this industry. I've dealt with abuse and fraud for years on many sides of the transaction (there are more than two). If you think you have a retort, please think carefully if you really understand what I just wrote above. There are no consequences for the victims. No matter how you define victim.
Edit 2: You deserve better explanations. I'll work on a blog post. But one case of a financially tight victim having to call the bank, etc. isn't enough. In the aggregate, nobody is inconvenienced. There are no consequences. If merchants had consequences, they'd stop accepting credit cards, but in the aggregate, that's a non-starter. Issuers similarly have no consequences. There's no arbitrage for improvement either.
If you think there is no victim I think you may not have a very firm grasp of economics. In particular, small negative consequences borne by many economic actors adds up to legitimate negative economic consequences, even if there is a collective action problem in addressing them. In order to make the argument that there is no victim, you will have to describe how this fraud is wealth creating, without appealing to any broken window fallacies. I guarantee this is impossible.
In reality, the costs of fraud are shared widely, and there are definitely victims in aggregate. First, the merchants are clearly victims. In a counterfactual universe that contains no credit card fraud, merchants pay lower fees to accept credit cards, and make more money for selling the same amount of goods at the same prices. Second, consumers are definitely victims. In the same counterfactual universe, consumers pay less for goods by a tiny margin, and thus are able to consume more and achieve higher levels of utility. Additionally, in this counterfactual universe, nobody has to deal with credit card fraud, which is an inconvenience which has both a direct dollar cost, in cases where people aren't satisfied with their legal protection or incur legal costs in exercising their protection, and in non-dollar costs like having to call their bank, stress, broken relationships etc. Note that these are real costs and lower standards of living and utility even if they aren't dollar costs.
From a macro perspective, it's obvious that fraud has a negative impact on the economy. All of the effort that is spent by every fraud researcher, fraud company, credit card company fraud agent etc. is fundamentally unproductive effort which is nonetheless included in GDP. If these people didn't have to deal with credit card fraud, because it simply didn't exist, they could be gainfully employed in other productive fields that work to meet the hedonic goals of other humans.
I just want you to be aware of the tough row you have to hoe if you are really planning on going down this path, and if you ignore the above arguments, well, you aren't making a very compelling case.
You are being downvoted because it is generally understood that there are indeed rather serious consequences for victims of credit card fraud[1].
If you have a viewpoint that is polar opposite to how everybody else understands something, maybe it's your obligation to explain it better. And saying that you're in some form of authority to speak about the subject isn't an explanation.
Updated: Apologies, I see now that the original comment specifically states there are no victims, period... even merchant victims.
Incorrect. There are no serious consequences for the victims of credit card fraud (unless you consider the victims to be the merchants).
When fraud takes place, the credit card company removes the bill from your statement. Then they take the money back that they sent to the merchant. The merchant is left holding the bag. Whatever they sold is now gone, and they have no money to cover the cost of that good. The merchants bear the entire risk of credit card fraud.
This is why it makes no sense that credit card companies even threaten to charge merchants higher rates if they have more fraud. Merchants with high chargebacks get beaten down in multiple ways. First there's a chargeback fee. Then they raise your processing rates. AND you still lose out on your goods that were stolen.
(Technically I suppose if the fraud is big enough, the merchant could be insolvent in which case the credit card companies bear the burden, but this is certainly an exception).
That's if the cardholder discovers the charge and if it hasn't already caused any problems (such as leading to bounced checks or inability to make an important payment). Your language is much to strong, especially since is wrong.
When the credit card is a check card (directly debits a checking account), and the fraudulent purchases leave insufficient funds to clear your outstanding checks.
He was very explicit in saying, multiple times, that his assertion was true for any definition of victim. It's easy to show that the victim of credit card fraud is typically the merchant, not the consumer.
I used the term consequences deliberately. The merchant may have losses, but they have no leverage. The option to not take credit cards is not available to most sellers of goods. On a large scale the cost of fraud simply becomes a cost of business that factors into the price the consumer pays. This is why many merchants offer a cash discount. To argue that the cash discount is just to cover credit card processing fees misses the point.
You may have used the word deliberately but you used it wholly incorrectly, which is the source of all the confused replies. Not being able to avoid consequences is not the same as there being no consequences.
The merchants are the victims, and the consequences include lost payments, lost merchandise, chargeback fees, lost cashflow when the merchant account provider starts requiring a risk reserve, and lost cashflow when their account gets terminated for exceeding the acceptable chargeback ratio. It can even lead to loss of the entire business. How is that not a consequence of credit card fraud?
This is true, although I think most people generally assume the "victim" in the case of credit card fraud is the individual whose card number is stolen.
I've had my card fraudulently used and I've also been on the merchant side of fraudulent transactions.
On the consumer side, I had to waste time ringing the bank, going through the chargeback process, getting a new card, not be able to use the card for a little while, etc.
On the merchant side, you waste time fighting the chargeback, and then if the chargeback goes through, you lose both the money and the goods.
So when you say there are no consequences for victims, it doesn't make sense to me... Could you elaborate?
CardSystems went out of business as a consequence of credit card fraud. Jonathan James killed himself swearing that he was innocent in relation to the TJX credit card breach. Perhaps orthogonal, but a consequence. Heartland Payment Systems went into pants-on-fire mode after their breach because they were very aware of the consequences CardSystems faced. Their strategy was to fess up and form an initiative for end-to-end payment encryption. They still have incurred over $150 million in costs and continue to face litigation 5 years after their breach. It could have been much worse, there's a per incident fine levied by Visa alone, outside of civil or statutory liability.
Maybe it 'isn't enough,' but that's not the same as no consequences.
While others have talked about the merchant as victim, it should be noted that the individual whose card is stolen and used also are victims. This is esp. true for folks who work multiple jobs or have very tight finances. Having to navigate banks to get fraud protection started or having your finances thrown off balance even for a day can be really hard on those people.
Even if you eventually get the money back, fraudulent credit card txns are extremely stressful and can easily have real impacts on debit card accounts. Saying so matter of factly "there is no consequence" is obviously wrong.
You say it's obviously untrue, so what are the obvious consequences of credit card fraud?
I believe that anything you suggest worth addressing costs more than the fraud itself. The only way to eliminate fraud is to show that doing so increases transaction volume. Since there has yet to be a proposed solution that does that, people focus instead on trying to "save money" lost to fraud, which doesn't work because there are no consequences to credit card fraud. (this is not a circular argument, though I see how it might read that way)
Well, theft is one obvious consequence. If someone steals my stuff with a credit card, I have suffered a loss as a consequence of the offender's fraud. I'm not sure how you can argue around that.
The reason we don't deal with credit card fraud is that there are no consequences for being a victim, for any definition of victim. If the victims had consequences, then there would be demand for action. But there is none. Further, because there are no consequences, the cost to solve credit card fraud isn't worth it.
Edit: This is a true statement. I feel capable to comment on this topic and have spent time working with this industry. I've dealt with abuse and fraud for years on many sides of the transaction (there are more than two). If you think you have a retort, please think carefully if you really understand what I just wrote above. There are no consequences for the victims. No matter how you define victim.
Edit 2: You deserve better explanations. I'll work on a blog post. But one case of a financially tight victim having to call the bank, etc. isn't enough. In the aggregate, nobody is inconvenienced. There are no consequences. If merchants had consequences, they'd stop accepting credit cards, but in the aggregate, that's a non-starter. Issuers similarly have no consequences. There's no arbitrage for improvement either.