By Melody Lashmar - Issue 2: Consumers lie and steal at a rate that easily surpasses the restrictions for fraud placed on merchant accounts.
It is unrealistic to think that consumers will stop lying and stealing, especially when there is no real consequence for so doing. There is only the rewards of getting something for nothing and their money back. I believe that there are two actions that can take place to assist with this issue.
First, the majority of consumers simply want their money back and they do not want to call the merchant because that would be lying directly to someone’s face…which, for the most part, is still taboo. But if there were a return reason code that was not considered merchant fraud but more along the lines of buyer’s remorse or account misuse then everyone would be happier as the consumer would get their money back in the first call, the issuing bank keeps their consumer happy, the card associations still wave their "secure network" flag and the merchant wouldn’t have to bear the additional negative consequences that a chargeback creates. Keep in mind that the merchant still bears the financial implications of each negative sale on their business.
The second action has to be that every time there is a transaction that is returned as unauthorized or fraud, the consumer’s payment account has to be terminated and they have to get a new one. This solution would not be complete without a penalty to the consumer's bank for not following this rule. How perfectly suitable is that solution? If you really did have an unauthorized transaction on your account, then you and your bank should be very keen to shut down that exposure. The consumer incurs the additional headache of updating any automatic or stored billing options they have with others, and the waiting period for the new cards and checks but their account was compromised… isn't closing the account and opening a new one the responsible thing to do? If someone stole their house keys, I bet they would change their locks, even if they knew the culprit. Issuing new accounts also costs the issuing bank money as they have the administration and the physical costs associated with account setup. Further, those nasty merchants and fraudsters would not have the new account information so the consumer’s and bank’s money and reputation are all safe and sound.
