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Combating Identity Theft
An anonymous reader writes "Net-Security is running an interesting article about some of the problems facing organizations when it comes to identity theft. From the article: 'Identity theft is the major security concern facing organizations today. Indeed, for the banking industry, it is the number one security priority for 2006. Identity security has developed beyond the simplest form of authentication where one party issues and verifies identities within a closed group of users. While easy to do, this approach is extremely hard and costly to scale upwards and offers no interoperability with other authentication networks.'"
Mar 11, 2005 -- How identity theft really occurs
Identity theft has become huge, as we all know. But how and why does it occur? Many people think that identity theft occurs because of what we do online. But just slightly more than 10 percent happens online. Almost all of it occurs when someone steals your checkbook, your wallet or your mail. The Internet actually helps in reducing ID theft, according to the Better Business Bureau. Monitoring your checkbook and credit card status online is a huge deterrent to identity theft because people find things quickly and can report them right away. So, if you still have a checkbook and you refuse to part with it, keep it at home and know where it is at all times. This is especially important for businesses, which are expected to keep a higher standard of security when it comes to securing checks. Businesses have liability for checks written that are stolen. So, keep very good track of your checks if you own a business.
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It's not theft. It's fraud.
Evil people are out to get you.
They don't want to make it harder to get credit. The whole basis of their profitability is giving easy credit to people who will draw on the credit, and pay them interest. Making it too hard to get credit would make them less profitable. It's only when the cost of identity fraud exceeds the profitability from easy granting of credit that they'll change.
a.
To put it simply: it isn't painful enough.
VISA actually requires that merchants, in some circumstances, NOT challenge the person using the card. (Have tou noticed that many merchants won't even ask for a signature for purchases below a set limit now?) Why? Because the cost of turning away potential sales - including fraudulent ones - is many multiples of VISA's cost of lost revenue due to fraudulent activity and theft.
What's more is that merchants, not the credit card issuers or underwriting banks, are the ones ultimately responsible for more than 90% of chargebacks. So if the merchant sells a product to someone using a fake card, and the rightful owner of that card challenges it, the merchant takes the loss, not VISA. So for the most part there's really not a direct reason for VISA to curb fraudulent activity at all.
So security in this case actually leads to loss of sales, and therefore loss of revenue for VISA. The customer is indemnified, VISA and the banks are insulated, and the merchant gets screwed - until they raise their prices to make up for the loss. And even then, it's the customer who bears the ultimate financial burden. IOW, VISA has every incentive to make it easier for people to use their cards, even if that means more identity theft.