It isn’t easy to measure how much fraud costs because what that loss is a matter of perspective over time – so participants rarely agree on a number. The stolen card transaction for a big screen TV is easily measured; but measuring the cost of the TV for the merchant with the cost of shipping, and dispute management isn’t. Determining a cost to the issuer for the cardholder’s loss of confidence is likely impossible. We state all of these problems because the Federal Reserve Board (FRB) will measure fraud and associated costs in the U.S. payments system and identify the causes and contributing factors to fraud. The complexity of this effort is not lost on the FRB:
“ ‘The vast number of participants and complex nature of the payments industry make it challenging to determine where the greatest opportunities exist for significantly mitigating fraud,’ said Ken Montgomery, the Federal Reserve’s payments security strategy leader and chief operating officer of the Federal Reserve Bank of Boston. ‘We hope to bring greater insight to the challenge with a comprehensive view of payment fraud data and payment security vulnerabilities that will help inform next steps for ongoing industry collaboration.’ ”
Too often the impact of fraud on merchants and consumers are not considered because of the difficulty, but perhaps this effort will broaden the research perspective to include one or both of these US payment participants.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
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