Comment by dahart

3 years ago

This argument is a naïve cost-benefit analysis, which is already a red flag, but on top of that it claims the damage is done primarily to business that can afford it, ignoring the fact that a non-trivial amount of fraud affects individuals.

> In the overwhelming majority of cases, that is where the waterfall ends. While insurance is available (both specialized chargeback insurance and general business insurance), overwhelmingly businesses simply absorb fraud costs in the same way that they absorb their office rent, staff salaries, and marketing expenses. That $10 to $20 billion number we threw around earlier? This is what happens to it, in the ordinary course of business.

This claim of “overwhelming majority” being businesses and being a marginal insurance-covered cost does not square with the fact that millions of individual are losing billions of dollars to fraud and suffering very negative consequences.

“In 2017, an estimated 3.0 million persons (1.25% of all persons age 18 or older) reported that they were victims of personal financial fraud during the prior 12 months. […] About 14% of financial fraud victims reported the incident to police. About three-quarters of financial fraud victims reported the incident to their family and friends (77%), two-fifths reported the incident to a company’s customer service (42%), and one-third reported the incident to their bank, credit card company, or other payment provider (31%). More than half of financial fraud victims said they experienced socioemotional problems as a consequence of the incident (53%). Financial fraud victims lost $1,090 on average and more than $3.2 billion in total.”

https://bjs.ojp.gov/content/pub/pdf/ffus17_sum.pdf

And what about the opportunity cost & lost potential to innovating better solutions to fraud? There’s no good reason to assume the cost to solve this problem is an ongoing expense.