Who Pays the Cost With Identity Theft + Credit Card Fraud?
Who foots the bill when fraud occurs — the merchant or the bank that issued the card? Retailers are increasingly complaining of being charged by the issuing banks for fraud they believe is the bank’s liability. BusinessWeek investigates with this story:
Improved systems to detect bogus transactions have produced a decade-long decline in fraud as a percentage of overall dollar transactions. In 2004, illegal credit-card purchases totaled $788 million in the U.S., down from $882 million in 2003, according to Nilson Report, a trade publication. That represents just 4.7 cents for $100 worth of purchases, well down from a high of 15.7 cents in 1992.
WEALTH OF DATA. “The truth is the industry has never been better at catching fraud as the fraudsters try to commit it,” says David Robertson, Nilson’s publisher.
The decline, however, hasn’t stopped the squabbling over who foots the bill when fraud does occur — the merchant or the bank that issued the card. Retailers increasingly complain of being charged by the issuing banks for fraud they believe is the bank’s liability.
The specter of such fraud was raised on June 17 when MasterCard disclosed that someone had penetrated the computer network of Atlanta-based CardSystems Solutions, which processes transactions for more than 40 million cards of all brands, including MasterCard and Visa. The hacker gained access to names, account numbers, and verification codes.