The optimal amount of fraud is non-zero (2022)
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The optimal amount of fraud is non-zero (2022)
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Re: The optimal amount of fraud is non-zero (2022)
#2To summarize: there is a trade-off between amount of fraud and ease of doing business. Zero fraud means doing legitimate business becomes too cumbersome.
Seems like the same point we have with security in computer systems and ease of use.
Re: The optimal amount of fraud is non-zero (2022)
#3Under the assumption that the only way to bring fraud to zero is to raise the bar high enough that legitimate customers will also be turned away, some fraud is acceptable and the author posits it is even a good thing: it means good customers are having an easy enough time being a customer, too.
Re: The optimal amount of fraud is non-zero (2022)
#4To summarize: there is a trade-off between amount of fraud and ease of doing business. Zero fraud means doing legitimate business becomes too cumbersome. Seems like the same point we have with security in computer systems and ease of use.
Important corollary: it may well be possible to reduce fraud much closer to zero (then the currently accepted rate) without negative effects on legitimate business.
For example, the USA's lack of a national ID (and the resulting adoption of realldy ba substitues like SSNs, driver's licenses and "two photo IDs") has made a plethora of fraud techniques ridiculously easy. In many other countries, "identity theft" so rare there is not even an established term for it.
Passkeys will hopefully turn into a similar case regarding computer security.
Re: The optimal amount of fraud is non-zero (2022)
#5I understand this and it's similar to what happens with, for example, theft or shoplifting: if we cracked down really hard on it, the honest user's experience would be disproportionately impacted and our collective freedom could be restricted too (imagine policemen searching whoever exits a supermarket, or cameras spying and tracking virtually everyone everywhere). At the same time, it's profoundly unfair that we need to let a certain class of people (fraudsters, scammers, thieves) to live at society's expense and I would like something could be done about that. Who knows, maybe sample crackdowns with really heavy consequences.
Re: The optimal amount of fraud is non-zero (2022)
#6To summarize: there is a trade-off between amount of fraud and ease of doing business. Zero fraud means doing legitimate business becomes too cumbersome. Seems like the same point we have with security in computer systems and ease of use.
Important corollary: it may well be possible to reduce fraud much closer to zero (then the currently accepted rate) without negative effects on legitimate business. For example, the USA's lack of a national ID (and the resulting adoption of realldy ba substitues like SSNs, driver's licenses and "two photo IDs") has made a plethora of fraud techniques ridiculously easy. In many other countries, "identity theft" so rar…
I lived in Spain and never understood how the DNI/NIE's weren't an easy vector for identity theft. You need to give the number to do the simplest things, and many people wanted to see the card (and possibly make a copy). As far as I know the smart chip on my card wasn't used once in 2.5 years. I suspect the digital certificates you could get from the government likely aren't as well protected by the general (non-technical) populace as they should be. What makes it harder for someone to steal identity via a DNI/NIE in Spain than someone could use a drivers license + SSN in the US?
(For what it's worth, I actually liked the national identity card, and didn't hear too much about identity theft - I'm just curious).
Re: The optimal amount of fraud is non-zero (2022)
#7Anti-fraud departments have apparently not gotten the memo, and the whole situation has gotten obscene in the last few years.
I regularly travel for work and it's impossible for me to make any purchases on major sites like Walmart, Best Buy, Target, Costco, etc. They all will accept an order, charge my card, and then randomly cancel the order some hours to days later, and refund me.
Similarly when traveling internationally, Schwab bank decided they didn't like one of my debit charges and blocked the card. I called Schwab and they gave me some "publicly sourced" 3 question quiz about myself that I apparently failed and they locked my entire account until I can fly back to the states and come into a branch.
Luckily I have a 2nd bank account and was able to change my payroll. But it's just insane to me that some random debit charge has resulted in my inability to access most of my money or my brokerage positions.
I hear similar issues and horror stories from all my coworkers and friends that travel.
Re: The optimal amount of fraud is non-zero (2022)
#8To summarize: there is a trade-off between amount of fraud and ease of doing business. Zero fraud means doing legitimate business becomes too cumbersome. Seems like the same point we have with security in computer systems and ease of use.
Important corollary: it may well be possible to reduce fraud much closer to zero (then the currently accepted rate) without negative effects on legitimate business. For example, the USA's lack of a national ID (and the resulting adoption of realldy ba substitues like SSNs, driver's licenses and "two photo IDs") has made a plethora of fraud techniques ridiculously easy. In many other countries, "identity theft" so rar…
To be a bit more general about this, I have found that the returns to combatting fraud are highly nonlinear.
Having a better national ID than SSNs would have effectively no negative impact while being a huge benefit for security and fraud prevention. It would also, if implemented well, be hugely beneficial for privacy. For instance things like Signal could move from requiring phone numbers to a ZKP using a national ID.
Re: The optimal amount of fraud is non-zero (2022)
#9Earlier quoted context omitted.
Important corollary: it may well be possible to reduce fraud much closer to zero (then the currently accepted rate) without negative effects on legitimate business. For example, the USA's lack of a national ID (and the resulting adoption of realldy ba substitues like SSNs, driver's licenses and "two photo IDs") has made a plethora of fraud techniques ridiculously easy. In many other countries, "identity theft" so rar…
I lived in Spain and never understood how the DNI/NIE's weren't an easy vector for identity theft. You need to give the number to do the simplest things, and many people wanted to see the card (and possibly make a copy). As far as I know the smart chip on my card wasn't used once in 2.5 years. I suspect the digital certificates you could get from the government likely aren't as well protected by the general (non-tech…
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Re: The optimal amount of fraud is non-zero (2022)
#10I believe this is a trivial thing with a misleading title.
Of course the optimal amount of fraud for a business is zero. A world with zero fraud would be optimal for them.
And (also of course) given that combating fraud has costs, there is a level at which investing more money and effort into anti-fraud has diminishing returns.
Therefore it is not worth it to go all in into the fight against fraud, but accept that some amount of it happens.
Surely none of this is surprising.