There's a lot of conflicting evidence/opinion on this idea.
https://en.wikipedia.org/wiki/Broken_windows_theory#Criticis...
I wonder if it's just economically more advantageous for the credit card companies to absorb the debt and simply nudge interest rates up a bit to recover their losses.
That's exactly what they are doing except the part with "absorbing debt". Banks and credit card companies don't suffer any losses because it's the merchants who absorb them. And that's the root of the problem. Majority of CC fraud is easy to eradicate but banks just have no incentive to do it.
Sounds a little like the economics of employer based health insurance. The parties with negotiating power (companies and health insurance) don't have much incentive to get a good deal for the patient because the patient is captive. Same for merchants and credit card companies.
It could/should tho be changed so that health insurance up to x% of income is tax-deductible, but only if freely chosen on a free market by the employee, with any other constellations being taxed as regular income, without the tax-deductibility. There can still be plans only offered to employees of a specific company, but the issue of preventing an employee from shopping insurance himself is gone.
There are alternatives e.g. girocard/giropay in Germany where the bank of the buyer takes the risk (only if a PIN was used, iirc.). The former is POS, the latter online. Accepting the latter does still cost 3%, and like 20ct or so per transaction. The risk is just not there for the merchant, so this might make sense. Therefore it is in the interest of the buyer's bank to make him adopt tighter security, e.g. with 2FA, in the form of sms or a rubber keyboard/lcd/photodiode based device that enables HID and limited automatic reading of a 5-bar blinking code on the screen to the chip in the bank card, which provides an 8-digit code bound to this specific transaction that has to be entered below the blinking bars.
The main benefit there is that banks are iirc. legislated to provide this to everyone, and because merchants have no risk this way they don't ever have to filter potential customers based on perceived creditworthiness and similar factors.
Re:How scammers get away with fraud
by MaxBarraclough on Monday July 09, 2018 @12:47PM
(#17491562)
> it's the merchants who absorb them
In the case of eBay seller fraud, eBay absorbs the loss. Report the fraud to them and you'll get your money back.
They don't even bother suggesting that you report it to the police.
Insurance companies might insist on you telling them a crime-report number (I imagine this is quite effective in reducing fraudulent claims of fraud), but eBay don't.
When I was younger some teens would water balloon my family's house a few times a week. We called the police when we thought we figured out who it was. They showed up within an hour, had a chat about it then went to the kids' houses who promptly confessed. It was all handled outside the legal system. Later I told a police officer about this story and asked why they were able to give it so much attention so promptly. He said something along the lines of, "it's easier to deter them now while they're still afraid of their parents' wrath."