Banks benefit from online credit card fraud by collecting chargeback fees from merchants each time.

First of all, banks and credit card companies should require online passwords to order online.

The amount of fraud online can be blamed on the banks/credit card companies for not better protecting the credit card owner as well as merchants. The banks/credit card companies should be required to require the credit card user to use passwords with additional authenticity checks such as dual passwords or security questions. The CVC on the back of the card can too easily be obtained and cannot be changed. Even when the credit card user uses their card at a restaurant, it is too easy for the waiter or whoever is swiping the card to copy the card number and CVC such as by just one quick snap shot with their mobile phone.

Why isn't the banks putting more effort into using passwords? It is very questionable on the banks intentions. Though banks claim they are trying to fight fraud, why don't they require passwords and more security checks when used online? Did you know that the banks get a chargeback fee, from $10 to $50 each time there is fraudulent use? So when there are fraud charges, the merchant will lose money by not being able to get back the item sent as well as having to pay the chargeback fee. The banks do not lose anything and in contrary benefit by receiving these chargeback fee revenues. There is a very big conflict of interest. The more fraud, the more banks/credit card companies make money.

The credit card user's website is made very nicely while the merchant's credit card website is made poorly, hard to use and confusing. In addition, when trying to fight a chargeback it is a lot of work for the merchant to handle. If the charge is fraud, the merchant will almost 99.9% lose the case and have to pay a fee to the bank. A lot of banks require the merchant to only send black and white images and text for their appeal against the chargeback. The system for the chargeback process is very old and hard to win in the case of fraud. When fraud happens, the credit card user is notified immediately while the merchant might receive a notification days, weeks or even months later making it even harder for the merchant to appeal the case.

Some banks, such as HSBC, are not allowing banks to even verify the charges. For example, if a merchant receives an online payment that is believed to be suspicious, the merchant can usually call the bank of that credit card to verify the charge by checking if the address, name, phone and card number matches. But now, HSBC is not allowing the merchant to even verify the charge. HSBC may only allow a three way call with the card holder and merchant but this opens the door to more crime and fraud. The merchant can't organize the three way call and HSBC can only arrange it. This makes it even more convenient for the criminals who can pretend they are HSBC with a fake credit card user on the phone.

Are the banks really trying to fight fraud or are they encouraging fraud? Each time the user disputes a charge, the banks get a fee. Thus on the user's side, the online website makes it very easy to dispute a charge. For the merchant it's very hard to appeal the dispute. Of the billions of dollars that are related to fraud, how much revenues have the banks received from these chargeback fees? How come banks like HSBC are not allowing merchants to verify credit card charges anymore? They claim it's for the user's protection but if this was true, why don't the banks require the use of passwords when credit cards are used online? Even the user's name name or phone number doesn't match, the banks allow the credit cards to be charged online. How is that protecting the credit card user?

In conclusion, if the banks were to pay anything for fraud and not benefit from chargeback fees they collect, you better believe the banks would implement a better system to stop fraud and fraud would not be out of hand like it is now. Banks love fraud because they collect billions of dollars on chargeback fees. Online fraud is out of hand and the banks not only are not stopping it but encouraging it by making it easy for the criminals as well as collecting fees each time fraud happens. Legislation and law should require banks to require users to use online passwords and security questions or devices to make online purchases. Banks should not charge merchants chargeback fees on fraud cases. Banks should return all the fees they have collected from merchants on fraud cases as the merchants suffer enough loses resulting from fraud. By putting pressure on the banks to be more responsible for online fraud will benefit both the consumer and merchant. It is a lot of hardship and work for both the consumer and merchant when fraud happens.

Comments are welcome and can be sent to [email protected] . A class action lawsuit and working with legislators and top lawyers are all part of the strategy to combat this issue.