Credit Card Issuers Spending 41% of Your Usage Fees on Fraud Prevention

It is a well-known fact throughout the banking and credit card industries that all credit card issuing companies are spending upward of 41% of total revenue every year on — more or less futile anyway — attempts to prevent (or at least limit) credit card fraud.

Anachronistic payment systems such as credit cards but also bank wire transfer technologies, dating from the age of the telegraph but still in use today, prove increasingly unfit for today’s Use Cases that much more frequently than in pre-internet days involve some kind of “overseas” aspect.

Despite the high extra cost thus associated with all “international” transactions, a large percentage of transactions in the consumer and B2C fields alone involve a “foreign” party in today’s world. These “overseas” transactions are particularly prone to fraud or other kinds of loss as legacy systems used by banks were not designed to process the volume of worldwide transfers they have to in this day and age.

Take to this the banks’ reckless integration of useless, and even more risky, new features into retails customer credit cards such as NFC (near-field communications) as their only “innovations”, and the unsuitability of both credit cards and banks themselves for the real world becomes even more obvious. NFC-equipped cards can be read at points of sale without card terminal contact, a fact already used for cracking and fraudulently charging to cards located in bags and wallets of passers-by.

It is, therefore, likely that these 41% are going to increase to even higher portions, unless a fundamental technology shift takes place — even with established banks seeing very little reason to finally come up with appropriate, modernised business models.

They are much more likely to continue “business as usual” and roll all their costs (and losses) over to the “stupid little customer” who, in their view, is only “there to be milked” (or slaughtered, should the need arise).

Leave a Reply