----- Original Message ----- From: "Victor Duchovni" <[EMAIL PROTECTED]>
Subject: Re: EMV [was: Re: Why Blockbuster looks at your ID.]

Whose loses do these numbers measure?

- Issuer Bank?

- Merchant?

- Consumer?

- Total?

I'd say that you've fairly well hit the nail on the head. I've actually been meaning to reply to this for about a week now. The truth is that each credit card transaction actually has either 3 or 4 parties; User U, Merchant M, Credit Card Issuer CCI, and Merchant Insurer MI (this is simplified there are generally multiple parties under CCI).

Under legitimate circumstances the process is fairly simple; Legitimate User LU agrees to pay CCI, CCI already has an agreement to pay M, and M supplies the product/service to LU. During billing LU pays CCI, CCI pays M, everyone is happy.

Things are different in the case of False User FU. FU goes to M, FU agrees for LU to pay CCI, CCI (believing FU is LU) agrees to pay M, M supplies the product/service to FU. During billing is where things get strange. LU reports the bad transaction to CCI. CCI informs M and does not pay M. FU gets the product, M accepts the loss. In the normal case MI and M are the same entity so the buck stops there, if MI is seperate from M, then MI reimburses M for some portion.

It's important to understand exactly who loses what when FU is in the picture. CCI loses the commision, generally a small flat fee on the order of $0.35, and a percentage generally <2%, this is not a large amount to lose, and the phone call to report the problem actually costs more than is lost, followed by the filing and tracking of the correct paperwork, this is the ACTUAL loss for CCI. MI loses the cost of the product/service reimbursed. LU loses basically nothing except time. FU obviously gains.

The point being that expecting CCI to foot a multi-billion dollar bill to change the process so that MI doesn't lose the money doesn't make sense. CCI will only work to increase CCIs profits. It is up to MI to pay for the upgraded systems by working with CCI towards CCIs goals (fewer losses for MI also means fewer reports to CCI so fewer losses). LU may be willing to foot part of the bill for the perceived improvements, CCI will only foot the portion that is in CCIs favor, MI will have to foot the majority of the bill and will only do so when it is in MIs favor. With credit card fraud decreasing, it is not in MIs favor to examine it at this time. Joe

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