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Secure Bank Payments

Comment 25th July 2010

The right to secure banking must be restored. Debit cards are not a secure payment system and are worse than cheques. Banks must be forced to give customers a secure payment system.

 Banks have decided to eliminate cheques just as soon as they can get away with it. They have already forced customers to have debit cards, and persuaded most retailers to drop cheques in favour of debit cards.

 Why? Supposedly because debit cards are safer and cost less to process. The reality is that debit cards transfer all risk from the bank to the customer – if the customer alleges a fraudulent transaction it is the customers problem, not the banks. In the past the bank had to prove that the customer had been negligent, now it is the other way round.

 Cheques provide clear physical proof of a transaction. Debit cards do not – there is no signature to be proved and no proof of time or location (there have been instances of these being faked). Every single time someone makes a transaction, they give the other party all the information required for fraudulent transactions by phone – 16 digit card number, account name and expiry date. No biometric is required – signatures may not have been perfect, but a fake can usually be spotted. No finite document is required – the card details do not wear out.

 Debit cards were supposedly more secure because the chips could not be copied. But 4 years after introduction pretty well every debit card still has an easily copied magnetic strip.

 Anyone can use a stolen or fake card with impunity. Cards must carry photos and, to detect different photos, the photo must be displayed and transmitted to the bank and stored each time the card is used.

 Banks must report all fraudulent use to the Police, no matter how small. Currently handling is delegated to banks, who may be tempted to sweep it under the carpet.

 All fraud must be deducted from bank profits and clearly reported as such in Annual Reports to shareholders. It must not be considered an operating cost, or passed on to customers.

Here is what is essential:

Change the law so the main theft risk lies with the bank, not the card holder.

Change the system to one where data used in one transaction is useless for another.

Validate all transactions with a random biometric including cardholder not present.

Withdraw all magnetic strip devices urgently.

Report all theft/fraud to the Police.

Deduct all financial losses from theft/fraud from profits and clearly report this to shareholders.

Why does this matter?

Banks have little incentive to tackle fraud while they can pass risk on to customers and bury it in their accounts. Much goes unreported and uninvestigated. Yet banks own the technology and customers are relatively powerless. Increasingly large amounts of money are being stolen yet banks are making theft easier because it is cheap than security. Widespread theft is feeding organised crime.

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