A recent study of online banks and merchants by Kaspersky Labs indicate that banks pay up but don’t bother to investigate cybrecrime. These banks would rather pay off the claim rather than secure their systems.
Even with the skyrocketing rate of information theft banks and merchants are simply compensating their customers for fraudulent charges. More than half of financial institutions, 52%, pay off their customers claim without conducting any kind of investigation whatsoever. The rate of pay off in Western Europe is 54%.
Kaspersky Labs joined with B2B International to conduct the study. The results show almost a third of institutions believe that the price of implementing an effective security systems is more expensive than simply repaying the customer’s loss due to Internet fraud.
It seems that the concept of paying off a claim is common among organizations that manage online payments. The study showed that 28% of representatives of financial institutions and 32% of employees of online stores who responded to the study believe that the cost of cybercrime, including the repayment of stolen money, is cheaper than implementing effective security in their payment systems.
Only 19% of banks and 7% of online merchants point to the cost of paying customer’s claims as one of the top three most serious consequences of online payment fraud.
And the situation is getting worse. Kaspersky Security Network reported that almost four million users of its products in 2013 have been affected by financial malware used to steal their money. This is an increase of 18.6% compared to 2012. In December of 2013 a group of U.S. banks reported losing more than $200 million due to the theft of customer’s personal information or their credit card data. Losses may be higher than reported due to the continued growth of cybercrime. Some experts believe that the situation will eventually get to the point where the costs of refunds these institutions pay out will exceed the budgets for customer compensation.
Breaking It Down
This is the Ford Pinto all over again. Remember Ford thought it cheaper to pay off lawsuits resulting from car fires rather than fix the problem. Well here we go again.
It seems banks and online merchants simply don’t care. Black people don’t play with our money. (Yeah, I said it again.) But the banks seem to be playing a game with a lot of people’s money. They feel like as long as its cheaper to pay off the loss rather than fix the system they are winning.
But these banks and financial institutions fail to realize one thing. They are not alone on an island. What they do affects a lot of people all over the world. Where is the stolen money going? It may be going to terrorist. It may be going to sleazy foreign governments. It could be used to buy weapons for private armies in some third world country. The money may be used to buy guns and drugs that permeate the inner city killing children, black children. The bottom line is that these banks are not only complicit in the crime they ignore, they perpetuate it.
African-Americans are consumers. We use the banks, credit cards and buy billions of dollars of goods every year. We also seem to suffer disproportionately when the economy starts to drag. We were victimized way beyond the national average in the housing market collapse. So we see this situation coming to a head. And we see we will get burned worse than others when banks begin to collapse from cybercrime.
By refusing to invest in secure systems these money changers destroy the trust that all people, not just African-Americans, have in the financial system. As black people we are not trusting of these institutions to begin with. So we are looking at this situation knowing that it can’t go on forever. Somebody has to pay and too often its the economic underclass which we make up a big part of.
We are heading for a world where people simply hide their money in the mattress and use cash for everything. What then? Well we could see another depression when there is no money in the banks for lending and credit dries up. When credit dries up so does economic development and you know we are going to get the worst of it. It is a situation that must be dealt with before something really bad happens. I need not go into that…do I?
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