The changing nature of U.S. card payment fraud: industry and public policy options

As credit and debit card payments have become the primary payment instrument in retail transactions, awareness of identity theft and concerns over the safety of payments has increased. Traditional forms of card payment fraud are still an important threat, but fraud resulting from unauthorized access to payment data appears to be rising, and we are only beginning to get a sense of the dimensions of the problem. ; Thus far, the role of public policy has been to encourage the card payment industry to limit fraud by developing its own standards and procedures. Whether this policy stance is sufficient depends on the effectiveness of industry efforts to limit fraud in light of the dramatic shift toward card payments. ; Sullivan provides an overview of card payment fraud in the United States. He develops a preliminary estimate of the rate of U.S. card payment fraud and suggests that such fraud is higher than in several other countries for which data are available. The U.S. payment industry is taking steps to combat payment fraud, but progress has been slowed by conflicts of interest, inadequate incentives, and lack of coordination. Thus, policymakers should monitor the card payment industry to see if it better coordinates security efforts, and if not, consider actions to help overcome barriers to effective development of security.

A Review Paper on Improving Security of ATM System

Automated Teller Machine (ATM) is an expedient way to access a bank account from anywhere and at any time to perform transactions like cash withdrawal, make deposits & transfer of funds. The ATM has become insecure due to tremendous increase in the number of criminals and their activities. ATM systems today use an access card and Personal Identification Number (PIN) for identity verification. In this paper, security of ATM has been improved by using an embedded system with three levels of securities. First level is access card with PIN; second level is biometric technique and third is One Time Password (OTP). The biometric that we have used is fingerprint. A tilt sensor is also used to alert about the robbery of cash from the ATM. The main motive of these techniques is to diminish and stop the attacks on ATM. The development of such an ATM system would protect consumers and financial institutions from intruders and thieves. In addition to these, the system allows only one nominee user to access the account instead of the main user in case of emergency

A Comparative Analysis of Civil Liability in Electronic Payment Systems Under the U.S. and Nigerian Laws

One controversial legal issue in relation to fraud in e-banking is how the losses arising from flaws in electronic payment systems would be distributed between the consumer and financial institution. The paper examines the scope of liability of the consumer and bank for unauthorised Electronic Funds Transfer (EFT) under the U.S. and Nigeria laws. Allocation of liability where a consumer is in the picture is, regulated by legal rules in the U.S. The Central Bank of Nigeria regulates e-payment liability issues through guidelines. The protection accorded the consumer by the U.S. EFT Act is wider and financial institutions share more liability than the consumer as opposed to the situation in Nigeria. Under the Nigerian law, consumers’ liability is unlimited.  Legal improvements are needed to protect the consumer as the weaker party within the context of electronic payment transfer. Keywords: liability, risk, consumer, electronic payment system, Electronic funds transfer DOI: 10.7176/JLPG/82-0

Better Than Cash? Global Proliferation of Debit and Prepaid Cards and Consumer Protection Policy

A global deluge of debit cards and prepaid cards – payment cards that do not require consumers to qualify for credit – is rapidly making electronic payment systems accessible to much of the world’s population that previously paid in cash for goods and services. The global proliferation of payment cards is fraught with both risk and promise for consumers. The billions of people of low to moderate incomes who are being hurled from a cash economy into the era of electronic payments in emerging economies by the proliferation of debit and prepaid cards are particularly vulnerable to abuses by banks and merchants. Unregulated private lawmaking by payment card associations and card issuers will not ensure that consumers are treated fairly, due to their countervailing incentives to attract merchants into their payment networks. Technological solutions promote efficiency and limit abuse, but cannot ensure fair resolution of consumer-merchant disputes. Payment card associations such as Visa and MasterCard operate chargeback systems for resolving disputes, but chargeback systems cannot function in cash economies without merchants’ consent, because cash transactions are usually anonymous, evidenced at most by a receipt, and do not involve an intermediary. However, while the lack of anonymity inherent in the use of payment cards entails risk for consumer privacy, it also makes possible greater transparency in payment systems. As billions of vulnerable consumers become connected to electronic payment systems, chargeback systems become a possible means of protecting them from merchant misconduct. Moreover, this lack of anonymity makes possible new ways of protecting consumers, such as disclosure to consumers of outcomes of the Visa and MasterCard chargeback systems through merchant ratings such as those posted on eBay. There is a risk that nations with emerging economies will uncritically emulate regimes of consumer protection adopted in the United States and Europe. These regimes in many respects lack a consistent conceptual foundation and fail to address problems, such as bank fees, access to banking services and payment system insolvency, that are poorly addressed in developed countries if they are addressed at all. For example, debit and prepaid card transactions are both a convenient means of obtaining cash and a substitute for cash, but this does not justify denying chargeback rights to consumers who use debit and prepaid cards, as if they had paid in cash. Prior scholarship on payment cards has suffered from the assumption that American use of credit cards is normative. This article demonstrates that it is a global anomaly; most consumers worldwide use payment cards for convenience rather than a source of long-term credit, and that is why debit cards have become popular so quickly. Moreover, fees and charges imposed on consumers for payment card services are one of the most prolific sources of consumer complaints. Fee regulation should be regarded as a legitimate part of payments law in scholarship on the subject, and should not be ignored in establishing a regulatory system to govern debit and prepaid cards

Awareness of BVN, SIM swap and clone frauds: Methods and controls

Bank Verification Number (BVN), SIM swap and SIM clone fraud have become an issue of great concern in Nigeria. It has left banking and telecommunications offices trudging with complaints and many bank customers in pains. The Federal Government and the Central Bank of Nigeria (CBN) introduced the BVN to prevent corruption, provide a transparent system of payment and effective account monitoring, and to uniquely identify bank customers in order to eliminate any incidence of fraud. Even as banks unilaterally implement this measure, fraudsters are continually devising means of defrauding bank customers of their possessions and evade detection. In this paper, the authors created an awareness on how bank customers are deceived into disclosing their financial details, the methods used in obtaining data for SIM swap and SIM clone, and to sensitize the public on how to prevent unauthorized access to their treasured details

The role of trade usage and the allocation of risk for unauthorized transactions in internet banking : a re-evaluation of the traditional bank-customer relationship

The Internet has had and will continue to have a major impact in the way in which banking business is conducted. This dissertation primarily considers the allocation of risks associated with Internet banking and in doing so considers the role of trade usage in Internet banking. The question of what the Internet is and more specifically what constitutes Internet banking is addressed. In order to have an understanding of the allocation of risks in Internet banking a good understanding of the traditional bank-customer relationship is necessary. The contractual basis for this relationship is discussed. The duties of the bank and the customer are discussed. In this regard the duty of a bank to act in terms of its customers mandate, the banks duty of confidentiality and the customers duty to exercise reasonable care are considered. The concept of a customer is briefly discussed. As trade usage plays a significant role in the contract between the bank and its customer, attention is given to the requirement for the recognition of a trade usage generally and more particularly in South Africa. The effect of Internet banking on the traditional bank-customer relationship is considered. The fact that a bank is still required to act in terms of its customer's mandate but is unable to identify is examined. As most Internet banking contracts impose an obligation on the customer to take security precautions and also limit the liability of banks, consideration is finally given to the possibility that the practices of banks in regard to Internet banking may have acquired the status of trade usage in this particular sphere of banking.LL.M. (Banking Law