kind of interesting that fraud is about 0.1% of revenue. Kind of says a lot about the margins behind being a payment processor.
I read this as being fraud accounts for 0.1% of the value of all handled transactions. The transaction fees of a payment processor seem to vary between about 1% and 2.5%(although this may differ for CNP scenarios).
Let's assume 2.5%, so fraud accounts for 4% (0.1%/2.5%) of the payment processor's fees. Intuitively, this doesn't feel too bad.
However, I'm not actually sure what that says about how much the payment processor spends on _preventing_ fraud (and so how this impacts their margins). I think all we can really say is that they're likely to be at or near an equilibrium where if they aimed for less fraud it would have a negative impact on their business.
This might not even be due to having to spend more money. For example, as you make your detection sensitivity higher, you're more likely to have false positives and reject valid transactions. In turn, this is likely to drive customers away from your payment processor towards your competitors.
Maybe a certain level of fraud is just a cost of doing business?
Just some thoughts...
Also, there are many, many fingers in the pie.
To Quote the blog that first reported the story and linke din the NYT article, "No one, is bold enough to call the emperor naked." http://www.droplabs.co/?p=1231
This is the whole bases and point of the article.
Apparently, Apple gave the banks the hooks they needed to eliminate the type of fraud the article describes but they didn't do it.
How is this Apple's fault?
"Isn’t this a Bank problem? And don’t that absolve Apple and Networks of their responsibility in this?
"It is unconscionable that Apple did not, and was not strongly advised by its partners – to make the Yellow Path implementation (by an issuer) mandatory sooner than it did – which was 4 weeks before AP launch. "
It was mandatory 4 weeks before the launch, so it's been 6 months since then... and yet we're seeing how banks haven't bothered to fix it?
I think Apple could have said something sooner, but in order to throw the word "unconscionable" around, I think that they would have to have done something deliberate or secretive.
I view that 90% of this rests directly on the banks' shoulders for not implementing good security in the first place, then sitting on not implementing it for months.