February 6, 2008
Phishing, password-stealing Trojans, and data security breaches are just three of the items contributing to high levels of ecommerce credit card fraud. According to CyberSource, the combined impact of ecommerce credit card fraud was estimated to be $3.6 billion in 2007.
Ironically, credit card companies actually profit from credit card fraud. When a customer disputes a charge, the amount is withdrawn from the merchant account along with an additional $30 to $40 'chargeback fee'. The disputed charge amount is then credited back to the customer's card, and the credit card company pockets the chargeback fee. To recoup their losses, the merchant is often forced to raise their prices, hence ultimately it's the consumer who pays.
Coincidentally, many merchants complain that when they report possible fraudulent use of credit cards, the credit card companies have been generally unresponsive. This has led many merchants to bypass the credit card firms and take matters into their own hands.
One defense employed by merchants is to avoid accepting credit cards originating from or involving ship to addresses in countries with high rates of fraudulent credit card transactions. The dirty dozen includes Russia, Yugoslavia, the Ukraine, Bulgaria, Egypt, Lithuania, Pakistan, Turkey, Indonesia, Israel, and Malaysia, with Romania topping the list. And apparently it's not just small ecommerce sites who feel compelled to take this tactic.
A petition by the Gamers' Community of Romania complains that Microsoft, Nintendo, and Sony are denying them access to online services included in the game consoles sold in Romania. As a press release announcing the petition explains:
"While Wiis, PS3s and Xboxes fly off the shelves at roughly the same rates as in other EU countries, the producers seem loath to offer service in an out-of-the way country which also has a bad reputation for card fraud. Full online services and support are unavailable, and the online game stores run by these companies are not accessible from Romania. Furthermore, there is no mention of this fact on either the product packaging or the manufacturers' websites.
The Romanian gamers are petitioning to either receive the services advertised with the consoles or to have the European Union punish the console vendors for false advertising.
Perhaps another approach would be for the Gamers Community of Romania to petition the Romanian government to crack down on credit card fraud. After all, as long as merchants report 80-100% fraud rates originating from Romanian-based transactions, global merchants are rightfully going to be reluctant to take a chance for the 0-20% that might prove legit.
