How we pay for everyday items and our bills has changed so much over the last 10 to 15 years. With the advancements in banking and online accessibility we have evolved how we purchase items. Technology has given us the ability to go online and pay our bills in a fraction of the time and shop from the convenience of our homes. Many benefit from the time saved on the consumer side and the company’s side, there are those that see all of this stored data as a gold mine of personal information that they can use for their own gain. Is there something that the customers should do differently to keep their information private, is it the job of the company’s to keep hackers our or should the government step in and put more controls in place. This paper is going to look at the changes that have taken place sense we first started to pay for things online and how identity theft and fraud has risen when security is no up to date.
Paying our bills has never been easier, in the past we would write a check put it in an envelope and mail it, when the company received it they would find our account and input the payment. So much time was used to pay bills and lots of paper wasted. Moving our bills online has given us the ability to see our accounts 24 hours a day, pay our bills no matter where we are and be notified if anything is out of the ordinary. You can avoid late fees and interest charges by knowing when your account is due and can set up reminders. By avoiding fees and interest you are saving money every month. With so much convince Yu, Hsi and Kuo (2014) bring up that “The main concern with electronic payments is the level of security in each step of the transaction, because money and merchandise are transferred while there is no direct contact between the two sides involved in the transaction. If there is even the slightest possibility that the payment system may not be secure, trust and confidence in this system will begin to erode, destroying the infrastructure needed for electronic commerce.” All of this ease and convenience has risks associated with it. Each person must decide what level of risk they are willing to accept for themselves and what is too risky. Past experiences can affect how a person decides if they will bank and shop online. In an interview by Krissah Williams (2005) of a newlywed couple Vanessa and Cyril who have very different styles of banking while “Vanessa, 38, says she is savvy enough to recognize fake e-mails from scammers trying to trick her into divulging personal and financial information. Cyril, 41, had his identity stolen years ago and thinks putting his account information on a computer is a risky move.”
With the rise of the credit card being used as the primary form of payment for purchases large and small, credit card fraud is on the rise. Sethi and Gera (2014) write that there are two main types of credit card fraud and 3 main types of fraudsters. Offline credit card fraud is when there is a credit card present to make a transaction or online fraud if there is no card present but the credit card information is used to make an online transaction. How fraudsters can get your information could be from buying it because they have little skill in hacking but wish to obtain goods online. There are those that physically steal credit cards and use them both on and off line. The third are called “Black Hat Hackers” which are usually very computer and security savvy and go out to sites that hold customer data to steal it, they then will sell it to the first group mentioned. Where there is fraud there are also detection methods. Tuthill (2002) lists the steps for software to be used to detect and analyzes fraud “Typically, a credit card is swiped at the cash register and information is sent over the credit card network via telephone lines. In one-quarter of a second, fraud detection software analyzes it, compares it, evaluates it in a thousand different ways and makes a prediction on whether a fraudulent act is occurring at that moment. The transaction is then approved or rejected and the retailer determines what happens next.” This is just one of several ways that companies detect fraud. They have to keep changing and evolving to keep up with the hackers and continue to update their software to avoid breaches.
Companies want to maintain customers and ensure they are keeping their risk as minimal as possible Fung, Molico and Stubber (2014) give an example “if one of the major non-bank payments providers fails, it could cause serious disruption to the economy and undermine confidence in payments systems.” Also “Central banks need to know more about how non-bank retail payments systems work and the risks raised by those systems.” Non-banks such as PayPal and Bitcoin have led to their own issues and risks. Many companies do not accept non-bank methods of payments but many companies do. Accepting payments from the outside venders depends on the volume of sales that can be generated through the payment system. System upgrades can help to keep up with customer wants and needs but can be costly and can open themselves up to more threats if not implemented properly. Tuthill (2002) says that “Merchants and bankers who do business online agree that losing money in a cyber-transaction is an uncomfortable possibility. Any traditional, cashless financial transaction involves risk, but the wide open nature of the internet raises the stakes.” With fraud detection, security and strong risk management techniques, risks can be reduced for companies and consumers.
With identity theft on the rise with internet use there are large questions being asked as to who is responsible for our online security. Piquero A., Cohen and Piquero N. (2011) conducted an extensive study to see who should be responsible and how much individuals would be willing to pay to have someone else take care of it. They found that 66% of the public is willing to pay an additional tax to the government for identity theft prevention if theft is reduced by 75%. Only 40% were willing to pay for the tax if it was only a 25% reduction in theft occurred. They found that the willingness to pay the tax was higher among individuals who have many credit cards and are already actively taking steps to prevent identity theft. “Converted into a “per crime” cost and combined with the portion of identity theft costs that are borne directly by business, we estimate the average cost per identity theft to range from approximately $2,800 to $5,100.” Just as Cyril did not want to do any business online due to bad past experiences, those that have been negatively affected are more willing to pay for protection in the future and are more willing to take steps to avoid having it happen again.
Online bill payments, retail purchases, and other online activity have produced a new kind of criminal and it is up to each person to decide what level of involvement they want to take to protect themselves. Each person has their own level of needs to be met and some can use less hands on methods while other will be checking their credit reports regularly to keep an eye out for fraud.
Fung, B., Molico, M., & Stuber, G. (2014). Electronic money and payments: Recent developments and issues. Retrieved from http://www.bankofcanada.ca/2014/04/discussion-paper-2014-2/
Piquero, N., Cohen, M. A., & Piquero, A. R. (2011). How Much is the Public Willing to Pay to be Protected from Identity Theft?. JQ: Justice Quarterly, 28(3), 437-459. doi:10.1080/07418825.2010.511245
Sethi, N., & Gera, A. (2014). A Revived Survey of Various Credit Card Fraud Detection Techniques.
Tuthill, M. (2002). Paying Online–Losing Money may not be the Biggest Threat. AFP Exchange, 22(6), 118.
Williams, K. (2005). Online banking: Are you ready? Black Enterprise, 35(12), 93-100.
Yu, H. C., Hsi, K. H., & Kuo, P. J. (2002). Electronic payment systems: an analysis and comparison of types. Technology in Society, 24(3), 331-347.