Online credit card fraud has been a growing issue over the past decade. With the advantages in modern day technology, online internet credit card fraud continues to be an ongoing societal issue. The issue of online credit card fraud has become a major crime that can easily be committed using the internet. Therefore, improving the online fraud detection is essential for maintaining the viability of the payment system. The following discusses a policy that can help limit the amount of online credit card fraud throughout society.
There are numerous individuals who are affected by credit card fraud. The problem is worsened when it comes to the purchase of digital products since credit card companies fail to give sufficient protection to the sellers who accept global payments, (Brabazon et al., 2007). Furthermore, most of the banks lose their potential income due to online card fraud, while the cardholders have the obligation to pay the whole amount aside from high interest rates and fees. Thus, online credit card fraud not only effects the consumer but it also effects the financial institutions who issue the debt.
According to Bar-Gill & Bubb (2012, p.973), having a credit card involves a certain risk and such risk becomes evident when the cardholder-borrower will default on repayment of his obligations. This risk does not only effect the consumer, it also effects the issuer of the debt. When a consumer is unable to pay their credit card debt, then the issuer is effected financially. This can have detrimental effects on society as a whole. Due to the lack of current laws and policies on the matter, there are no penalties for online fraud. Fraud is not even addressed in current laws and policies regarding credit cards. Due to the lack of policies and penalties, the cardholder is left with credit card bills they cannot pay while the issuer suffer financially.
This is especially true when it comes to credit card fraud. Credit card fraud can have devastating consequences because the victim is left to pay someone else’s bills. Several individuals are not financially able to take on that kind of financial responsibility. Thus, the financial institution suffers from the consumer’s inability to pay the debt. Policies need to be put in place in order to limit the amount of online credit card fraud in order to limit the negative implications it has on society.
The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 or the CARD Act does not involve the imposition of penalties for online fraud, but only sets the risk assessment of the issuer when the cardholder makes a late payment or exceeds the credit limit, which can cause financial distress to the issuer (Bar-Gill & Bubb, 2012, p. 974). In other words, there are no policies regarding the offender of online credit card fraud. There are no policies in place in order to tract down and punish the individuals who are committing these crimes. Thus, nothing is deterring these individuals from committing credit card fraud.
Increasing penalties and applying the rational choice theory to address online credit card fraud would mean making it costlier, tougher, riskier, and technologically inconvenient for hackers to increase the risk of fraud and make it above rewards associated with it. Due to the lack of policies and laws to prevent the crime, the number of victims continues to increase as transactions can be completed online using the internet. The goals of the policy should be to decrease the amount of credit card fraud that can be completed online.
It is recommended that policies need to be established in order to properly screen cardholders and their transactions. Segal, et al (2011) recommend for reforms on laws and nation-wide policies that will require data security standards and promote the interest of all stakeholders affected by the credit card fraud. The best approach to stop online credit card fraud is by setting new standards that will provide incentives to credit card companies and banks who comply with the standards. The government should offer financial incentives to companies who implement the following screening methods and reduce the amount of online credit card fraud throughout society.
Better screening processes should be used in order to reduce the level of online credit card fraud throughout society. Solutions such as AIS, CVV number, intelligent cards, etc. are effective solutions for tackling issues related online credit card fraud. The AIS (Artificial Immune Systems) that can be used in the detecting fraud as AIS helps in flagging non-standard transactions (Brabazon et al, 2010). AIS is a great screening system. Whenever a transaction is suspicious, the cardholder will have to verify with the company that it is them making the transaction.
AIS is an example of a screening tool companies can use in order to better protect themselves. However, AIS does not discourage an individual from attempting to commit credit card fraud. For example, if an individual who is conducting credit card fraud attempts to purchase a product for a substantial amount of money over the internet, than AIS will flag that transaction and the card will be declined. The cardholder is called in order to verify they are the ones making the purchase. At this point, the cardholder is alerted that someone is attempting to commit credit card fraud under their name. However, AIS does not have policies regarding the credit card fraud offender. The system simply declines the transaction and the card is turned off. The offender is not sought after or ever punished for his attempted crime. Thus, this does not defer an offender from attempting to commit credit card fraud.
This policy should specifically target credit card offenders. One of the main problems associated with credit card fraud is that the offender is hardly ever caught. Thus, the cardholder is left with the debt with no restitution. This policy should aim at finding those individuals and prosecuting them. The more people who are caught committing credit card fraud, the less individuals who will attempt to commit the crime as well. Punishment is a way of deterring an individual from participating in credit card debt.
Segal, Ngugi & Mana (2011) recommend that credit card companies and banks should build their own self-interested infrastructure that will isolate them from the liabilities attached brought about by credit card fraud (Segal, et al., 2011). Thus, companies should build their own version of AIS. Companies should create their own screening methods and tools in order to protect themselves and their clients from online credit card fraud.
The purpose of the policy is to decrease the amount of online credit card fraud in order to decrease the negative effects it has on the consumer and the issuer. Not only is the consumer effected by credit card fraud, but the issuer is also effected by the consumer’s inability to pay their debt. The purpose of this policy is to eliminate credit card fraud in order to stop the negative impacts it has on society. When banks start losing money because of online card fraud, customers (cardholders) need to pay the entire amount in addition to high interest rates, reduced benefits and higher fees. Therefore, it is in the best interest of card holders and banks to ensure online credit card faults are somehow eradicated (Chan et al., 1999, p. 67-73).
The implementation plan for this policy is to implement, monitor, and reinforce. The main concern for this policy is proper monitoring of businesses and individuals in order to insure no credit card fraud is going on. The government must monitor to make sure every business is implementing their own screening system. Monitoring is a continuous process. In other words, it must continually be conducted after a given amount of time. Lastly, the policy must be reinforced. The main way to reinforce the policy is by punishing the individuals who do not follow the policy. The government needs to make sure that businesses are using proper tools in order to tract down and prosecute the individuals who are committing the online credit card fraud. One of the reasons why credit card fraud is so large because there is little risk associated with the crime. Without the fear of punishment, an individual will be more inclined to participate in an illegal activity if the benefit of that activity overrides the cost. In these circumstances, the cost is low because the likelihood of getting caught is substantially low. By monitoring businesses and individuals, the government will be able to tell who is not properly implementing screening tools in their business plan. These businesses and individuals should be punished accordingly in order to deter others from doing the same.
In conclusion, a policy should be created in order to make credit card screening mandatory for all companies as well as targeting the offenders of online credit card fraud. It is recommended that there should be new laws enacted to increase penalties to address online credit card fraud that will make it more inconvenient for hackers to increase the risk of fraud before they decide to continue their criminal intentions. Furthermore, there should be more emphasis on capturing the individuals who are responsible for the credit card fraud. By capturing and prosecuting them, other individuals would be discouraged from commit the same crime. The main reason why people are still committing online credit card fraud is because people are getting away with it. Thus, more emphasis should be placed on punishing the offender in order to eliminate online credit card fraud.
References
Bar-Gill, O., & Bubb, R. (2012). Credit Card Pricing: The CARD Act and Beyond. Cornell Law Review, 97, 967-1018. doi:10.2139/ssrn.1985948
Brabazon, A., Cahill, J., Keenan, P., & Walsh, D. (2010, July). Identifying online credit card fraud using artificial immune systems. In Evolutionary Computation (CEC), 2010 IEEE Congress on (pp. 1-7). IEEE.
Chan, P., Fan, W., Prodromidis, A., & Stolfo, S. (1999). Distributed data mining in credit card fraud detection. IEEE Intell. Syst, 14(6), 67-74. doi:10.1109/5254.809570
Segal, L., Ngugi, B., & Mana, J. (2011). Credit Card Fraud: A New Perspective on Tackling An Intrasigent Problem. Fordham Journal of Corporate & Financial Law, 16(4), 743-781.
