Comment by manholio

> The optimal amount of fraud a business/industry should accept is non-zero

Let's make that: "The optimal amount of fraud a business should accept under the current credit card online payment system is non-zero".

There is absolutely nothing intrinsic about online commerce that requires fraud. Online business routinely operate with a money first, zero consumer trust paradigm. They ask for my payment credentials first, and only then deliver the products.

If we were to design the online payment system from scratch, we would use cryptography to completely remove the notion of credit card theft, and escrow to settle consumer complaints, with an option for paid arbitration when things go bad. I guess you can call some of those cases "fraud" and some customers are so unreasonable that they border on criminal, yes, you can't make that segment zero, but I don't think that's the kind of fraud they are referring to.

The reason we can't have those nice things is because of immense momentum of the current system designed in the 60s by companies that have very little reason to change anything. In fact, an online payment reform would most likely strip them of their oligopoly. So yes, the optimal fraud level is non-zero because Mastercard, Visa etc. can push that fraud onto consumers (via retailers), and they are making much more money anyway from the current situation.