Edgar Danielyan <[EMAIL PROTECTED]> writes:
>> A system in which the credit card was replaced by a small, calculator
>> style token with a smartcard style connector could effectively
>> eliminate most of the in person and over the net fraud we experience,
>> and thus get rid of large costs in the system and get rid of the need
>> for every Tom, Dick and Harry to see your drivers license when you
>> make a purchase. It would both improve personal privacy and help the
>> economy by massively reducing transaction costs.
>
> Yes. And it will not happen. The cost and hassle of introducing such a
> system will be so high that it wouldn't make sense financially, at
> least not in the foreseeable future.

I'm think you wrong on that one. Financial cost and benefit are easily
assessed on this, and I think the numbers add up. Credit card fraud
costs in the hundreds of billions of dollars a year, much of which
could be eliminated by a change to the sort of system I
mention. That's not a small amount of money. Indeed, it is more than
enough incentive for a major change.

The cost of deploying such a system has also gone down very
fast. Fifteen years ago, the hardware and communications costs would
have been prohibitively large. I believe that this is no longer the
case.

So, in summary, with fraud costs extraordinarily high, and the price
of a new system falling, it would not take much time to amortize the
costs of a new system, after which every dollar saved is pure
profit. The incentive is now in place.

> The banks and other credit card issuers accept that there are some
> losses they will have, they try to minimise/control them and offload
> a portion of the remaining risk to cardholders, merchants and
> insurance companies.

"Minimization" at the moment means accepting massive losses in the
system. The cost of deploying a better system would swiftly pay for
itself. I suspect that the time is finally right for such a thing.

Perry

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