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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)

#151

Post by thworp »

akerl_ wrote: post #63
wwalexander wrote: post #59

Earlier quoted context omitted.

The answer isn’t as clear as you think. https://www.aclu.org/documents/5-problems-national-id-cards

It seems pretty clear. That article is just an example of the craziness I was describing. Notably: having a unified ID structure has a ton of upsides, and "preventing terrorism" seems fully orthogonal. Additionally, we already have IDs that register humans into databases and are tracked when people travel, it's just that the databases are disjoint and thus even more error prone because they're run individually by sta…

> it's just that the databases are disjoint and thus even more error prone because they're run individually by states.

That is a huge advantadge if the federal governments ever gets taken over by totalitarians. Surely at least some states will refuse to authenticate their ID cards when requested by the feds, some may even issue fake IDs to resistance members. If the feds have a centralized database with updated information on residences etc, they can quietly disappear people.

Re: The optimal amount of fraud is non-zero (2022)

#152

Post by tremon »

rkachowski wrote: post #137
avianlyric wrote: post #121

Earlier quoted context omitted.

Apple iPhone release day is a right royal pain in the arse for banks. The surge of one-off high value payments causes a huge spike in false positive fraud detections, which then swamps staff responsible for performing manual checks. And that’s after we’ve already tweaked rules to prepare for iPhone day On top of all the, the fraud systems at the major card networks also go haywire. They start seeing huge spikes in hi…

Allowing me to buy things via my bank account is pretty much the use case for a bank account. I have very little sympathy for the self inflicted "byzantine" consequences that result from a single valid purchase.

But they're mostly not self-inflicted: the cause of all these things is asinine banking regulations (under the guise of combating terrorism) that are enacted by governments all across the world.

Re: The optimal amount of fraud is non-zero (2022)

#153

Post by tremon »

amadeuspagel wrote: post #132

> This is counterintuitive and sounds like it is trying a bit too hard to be clever. Indeed. You could make the same counterintuitive and clever point about any bad thing, pointing out that there are things one might do to reduce that thing, which have other costs, and aren't worth it, but for many bad things that would not sound counterintuitive and clever, but deranged. Consider the following statement: > The optim…

> The optimal amount of radioactive material in food is non-zero.

But this is true! Everything except lead is radioactive in some capacity. Pretty sure us humans cannot live on lead alone.

Re: The optimal amount of fraud is non-zero (2022)

#154

Post by tremon »

concordDance wrote: post #76
tgv wrote: post #73

Earlier quoted context omitted.

> The optimal amount of [...] deaths [...] is not zero. That's not true. It assumes that there is an objective, known price for a life. Since you can't have e.g. 0.1 deaths, there's no guarantee that the optimal amount is at least 1. It's more that it's the outcome of haggling, politics, and the willingness to turn a blind eye to the consequences of stupidity.

There's a price for life in a given society though. Due to resources being finite and wellbeing mattering. In the UK I believe NICE uses £30k/QALY as the price.

£30k/QALY

nit: pretty sure that should be £30k * QALY.

Re: The optimal amount of fraud is non-zero (2022)

#155

Post by avianlyric »

rkachowski wrote: post #137
avianlyric wrote: post #121

Earlier quoted context omitted.

Apple iPhone release day is a right royal pain in the arse for banks. The surge of one-off high value payments causes a huge spike in false positive fraud detections, which then swamps staff responsible for performing manual checks. And that’s after we’ve already tweaked rules to prepare for iPhone day On top of all the, the fraud systems at the major card networks also go haywire. They start seeing huge spikes in hi…

Allowing me to buy things via my bank account is pretty much the use case for a bank account. I have very little sympathy for the self inflicted "byzantine" consequences that result from a single valid purchase.

You don’t seem to understand, the Byzantine problems are caused by Apple. They don’t bother properly following the network rules and guidelines, as a consequence the data banks get about their transactions in order decide an approval or detect fraud is a complete and total mess. Makes detecting fraud vs legitimate transactions harder than it should be.

Eh, I assume you also want your bank to block fraudulent transactions on your card. Somehow I doubt you would react kindly to someone buying half a dozen MacBooks on your card without your knowledge.

Re: The optimal amount of fraud is non-zero (2022)

#156

Post by SideburnsOfDoom »

cyrillite wrote: post #91
eviks wrote: post #72

> This is counterintuitive and sounds like it is trying a bit too hard to be clever. You should believe it. Yes, you're > you should welcome greater than zero fraud. You can think of it as a necessary expense, just like rent or salary or advertising is. You don't WELCOME costs just because they're necessary. Similarly, you wouldn't welcome fraud just because it's too costly to get rid of it. And if you add a tiny bit…

The argument seems to be a little different than what you’ve taken from it. My interpretation was something like and efficient frontier model between multiple variables where “zero fraud” isn’t actually a position on that frontier. So, if you find a place with zero fraud, you can possibly increase the total utility of the system by aiming for slightly less than perfect but being back on the efficient frontier. Arguab…

You can find a place with zero fraud by denying all transactions. This is of course, maximally inefficient and totally useless.

It's less about "allowing fraud" and more about managing false positives in the fraud detection subsystem: it should ideally detect fraud, and only fraud. The false positives need to be low enough for the system to work, without also having so much fraud that the system stops working. Ideally there are no false positives at all, but at some point the effort to reduce this further exceeds the returns. Like with fraud.

Re: The optimal amount of fraud is non-zero (2022)

#157

Post by avianlyric »

tremon wrote: post #152
rkachowski wrote: post #137

Earlier quoted context omitted.

Allowing me to buy things via my bank account is pretty much the use case for a bank account. I have very little sympathy for the self inflicted "byzantine" consequences that result from a single valid purchase.

But they're mostly not self-inflicted: the cause of all these things is asinine banking regulations (under the guise of combating terrorism) that are enacted by governments all across the world.

Nope, there are very few banking regulations that exist to prevent terrorism, mostly because transactions associated with domestic terrorism look exactly like normal transactions, and are so few and far between that statically there’s basically zero chance you’re gonna correctly detect them.

Any rules that are around detecting terrorism are mostly to do with sending money to sanctioned countries and individuals. Those rules are stupidly annoying to work with, because you’re basically force to write a rule that boils down to “does transaction description include the word ‘Iran’ then flag/block transaction”. As you can probably imagine they’re not very effective, but you look like a fucking idiot if your customer gets caught up in a terrorism investigation, and you didn’t flag/block those transactions.

Most regulation deals with something far more mundane, money laundering. It’s mostly to prevent organised crime groups being able to launder their cash, that either cash generated from the “traditional” crimes, but more often it’s cash generated from socially engineering normal people into handing over bank details, or simply convincing them to send their life savings to a fraudster. Something that’s far more common than people expect, and far more effective than people expect.

Re: The optimal amount of fraud is non-zero (2022)

#158

Post by jeanlucas »

ExoticPearTree wrote: post #103
pembrook wrote: post #49

Earlier quoted context omitted.

Ditto to this. My experience has been very similar to yours. The amount of incompetence involved with payment processing and banking is just mind boggling. KYC/AML is very quickly turning into bizarro big brother. But not an all-knowing AI big brother. A stupid 2005-era IP address detecting one. You do a little too much traveling? Poof. There goes a month of your life to banking jail. A simple two-factor mechanism li…

Banking regulations and poorly understood rules by lawyers transform into monstrous implementations of security for banks. For example, my banking app requires Face ID to unlock it and to approve payments. But for certain types of payments, such as more than 3k USD, instead of using Face ID to process the payment it requires and SMS OTP entered into the app. Which tends to suck when I'm using another SIM or if the SM…

Funny enough, using sms for higher values is riskier giving that SMS is not a safe protocol at all

Re: The optimal amount of fraud is non-zero (2022)

#159

Post by avianlyric »

izacus wrote: post #125
avianlyric wrote: post #121

Earlier quoted context omitted.

Apple iPhone release day is a right royal pain in the arse for banks. The surge of one-off high value payments causes a huge spike in false positive fraud detections, which then swamps staff responsible for performing manual checks. And that’s after we’ve already tweaked rules to prepare for iPhone day On top of all the, the fraud systems at the major card networks also go haywire. They start seeing huge spikes in hi…

Poor guys, having to work to fix the fsck up they created themselves.

At the end of the day, you end up paying for fraud. The article might say that business “absorb” the cost, but that’s bullshit. Business “absorb” the cost by increasing prices, and increasing fees.

Given the fraud generally effect all businesses in the same market equally, there’s little incentive for businesses to reduce fraud, because it cost all of their competitors are having to absorb, so everyone just bakes the cost of fraud into their prices.

Re: The optimal amount of fraud is non-zero (2022)

#160

Post by mcv »

teh_infallible wrote: post #70
pembrook wrote: post #49

Earlier quoted context omitted.

Ditto to this. My experience has been very similar to yours. The amount of incompetence involved with payment processing and banking is just mind boggling. KYC/AML is very quickly turning into bizarro big brother. But not an all-knowing AI big brother. A stupid 2005-era IP address detecting one. You do a little too much traveling? Poof. There goes a month of your life to banking jail. A simple two-factor mechanism li…

[flagged]

HN loves and cares deeply about crypto as in cryptography. Cryptocurrencies, however, have already been rife with fraud. Claiming it's designed to solve this isn't particularly convincing if it failed to solve it.
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