5 ms·

kind of interesting that fraud is about 0.1% of revenue. Kind of says a lot about the margins behind being a payment processor.

by rtpg 12y ago

baldfat 12y ago
Fraud rate is 0.1% Fraud rate of Apple Pay is 6% that is 600 times higher. The NYT places the Banks at a higher fault because they should know better. I place blame on the strong arm tactics that Apple uses on every deal they make.
- oddevan 12y ago
  Normally I'd agree with you, except if ANYONE could stand up to Apple's "strong arm" tactics, it'd be freaking Bank of America and Wells Fargo.
- objclxt 12y ago
  Although that 6% figure is completely unsourced, unverified, and comes from someone employed by a competitor. So...
  - baldfat 12y ago
    An industry consultant does not equal a competitor. It is 100% source and is 100% not verified nor can it be verified. Except if the banks came out and said it. This is standard journalism practice when there is a problem with something that can't be normally verified. 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 http://www.droplabs.co/?p=1231 This is the whole bases and point of the article.
- crusso 12y ago
  In this thread there are two accounts describing how some banks require extra verification before their cards can be added to Apple Pay... and sombe banks don't. 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?
  - baldfat 12y ago
    To quote someone that the article links to: http://www.droplabs.co/?p=1231 http://www.droplabs.co/?p=1231 "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. "
    - crusso 12y ago
      "unconscionable" that banks should be expected to understand security well enough to know that not using any verification was stupid? 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.
maffydub 12y ago
It's a good observation, but I was trying to work out what this actually says. 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...
indymike 12y ago
Founder at a small payment processor. Most of the risk for fraud is shifted to the merchant or payer (small transactions, not reported quickly... terms in the cardholder agreement). The processor is usually only on the line for refunding fees in the original transaction... there are a few exceptions (i.e. merchant doesn't have money in the bank when the payment is pulled back and heads for the hills). Also, there are many, many fingers in the pie.

kind of interesting that fraud is about 0.1% of revenue. Kind of says a lot about the margins behind being a payment processor.

by rtpg 12y ago

kind of interesting that fraud is about 0.1% of revenue. Kind of says a lot about the margins behind being a payment processor.

baldfat 12y ago

Fraud rate is 0.1% Fraud rate of Apple Pay is 6% that is 600 times higher. The NYT places the Banks at a higher fault because they should know better. I place blame on the strong arm tactics that Apple uses on every deal they make.

oddevan 12y ago
Normally I'd agree with you, except if ANYONE could stand up to Apple's "strong arm" tactics, it'd be freaking Bank of America and Wells Fargo.
objclxt 12y ago
Although that 6% figure is completely unsourced, unverified, and comes from someone employed by a competitor. So...
- baldfat 12y ago
  An industry consultant does not equal a competitor. It is 100% source and is 100% not verified nor can it be verified. Except if the banks came out and said it. This is standard journalism practice when there is a problem with something that can't be normally verified. 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 http://www.droplabs.co/?p=1231 This is the whole bases and point of the article.
crusso 12y ago
In this thread there are two accounts describing how some banks require extra verification before their cards can be added to Apple Pay... and sombe banks don't. 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?
- baldfat 12y ago
  To quote someone that the article links to: http://www.droplabs.co/?p=1231 http://www.droplabs.co/?p=1231 "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. "
  - crusso 12y ago
    "unconscionable" that banks should be expected to understand security well enough to know that not using any verification was stupid? 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.

maffydub 12y ago

It's a good observation, but I was trying to work out what this actually says. 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...

indymike 12y ago

Founder at a small payment processor. Most of the risk for fraud is shifted to the merchant or payer (small transactions, not reported quickly... terms in the cardholder agreement). The processor is usually only on the line for refunding fees in the original transaction... there are a few exceptions (i.e. merchant doesn't have money in the bank when the payment is pulled back and heads for the hills). Also, there are many, many fingers in the pie.