Yes it doesn't "solve" the problem, and yes it removes some legitimate users, but it's by no means useless. Given the tradeoffs involved I'm not at all surprised it's so common.

If you have a solution that's less invasive (e.g., some businesses can get away with not providing anything expensive till after a payment has cleared the normal fraud window, and many businesses don't have obscene levels of malicious traffic; in those cases you can just let bad traffic run rampant and ignore it till it's a problem) then that's probably better, but blocking VPNs or whole countries or whatever can be the difference between a successful business and bankruptcy.