Last week, I was thinking a bit about the many issues of fraud in the card payments world and how the lack of a business case within the industry itself has slowed adoption of various technologies that could be deployed to reduce fraud. It struck me that the old but well proven idea about “broken windows” in policing had a potential role to play in thinking about these issues.
Late last year I was working on adding a module to our Payments Boot Camp series about the decision taken in the UK in the early years of this decade to migrate from mag stripe-based payment cards to Chip and PIN. During discussions with several participants involved in that process at the time, it was clear that there wasn’t a positive financial business case for making that decision – although there might have been forecasts of accelerated growth in counterfeit card fraud ahead and perhaps the need to make an earlier decision because of the deployment timeframe involved to react one a decision to move had been taken.
What was particularly interesting to me, however, were comments made about the influence of the UK government in raising concerns with the banks about the negative effects on society that growing card fraud was having within the country. Essentially, a “broken window” concern – that card fraud was leading to other forms of crime as well. In combination with the weak business case and concerns about deployment time, the broken window aspects help tip the decision in favor of acting rather than waiting. Essentially, an “externality” factor – an influence from outside the financial aspects within the industry itself – helped make the decision to move.
Dave Birch and I had a fascinating chat about this last week – Dave extends that discussion in his Digital Money Forum blog post here.
What do you think? Is there a broken windows problem with the current level of fraud in the card payments world?
Scott is a founder of Glenbrook with more than 30 years of experience in information technology. He is a co-author of the book “Payments Systems in the U.S.” and a co-inventor of US Patent 6,332,126 and US Patent 7,840,459. At Glenbrook, Scott focused his work on payments innovation, mobile payments, and social media / Web 2.0 in banking and financial services.
Previously, Scott was group executive vice president at First Data Merchant Services and at Visa International, where he led the development of Visa’s global payment systems strategies. Scott began his career as a systems engineer with IBM, where he held a series of technical management and product planning positions over seventeen years. Scott formally retired from Glenbrook in October 2016, but remains important to the firm as both a friend and advisor.