From: jon@balder.us.dell.com (Jon Boede)
Date: Wed, 12 Jan 94 07:12:05 PST
To: szabo@netcom.com (Nick Szabo)
Subject: Re: Credit cards vs. digital cash
In-Reply-To: <199401111214.EAA10092@mail.netcom.com>
Message-ID: <9401112336.AA17384@balder.us.dell.com>
MIME-Version: 1.0
Content-Type: text/plain


Nick Szabo writes:
> For online services, where the customer can be billed in near
> real-time, the case where a large bill approaches the credit limit
> is at least exceptional, and might be eliminated entirely.

I run a national network of public-access email systems.  We do not validate
anything about our callers and when they run a credit card charge, all we ask
for is the name on the card -- we don't check that against anything.  We have
50% more subscribers than the Well and we're making buckets of money.  Even
though our callers are anonymous we still see a chargeback rate of less than
0.5%, which we consider to be an acceptable cost of doing business.

It's my opinion that we have four things working in our favor:

1.  Most people are honest.  When you start analyzing the different ways that
    people can screw you, you can quickly forget this point.

2.  People buy their time in advance.  We "see" these people on a regular
    basis so we can partially "recover" by shutting off an account operating
    on fraud-based monies.

3.  We limit people to buying only what they need for the short term and do
    not give them the opportunity to charge up a card.

4.  We have a long memory for bad card numbers and shady customers. :-)

I say these things because I've noticed that there is a general assumption
that anyone doing commerce in a more anonymous environment like cyberspace
is going to be Under Siege at All Times by People in Black Hats.  That's an
appropriate attitude to take in order to set the context for the discussion
of ways to prevent fraud, etc.  But! don't be surprised that when you
present the results of your efforts to people who are looking to do business
on the net, that they will tell you that your solutions are too complicated
and too paranoid for their situation.  Most people will be too busy running
their business and counting their money to really care about that 0.5%

Jon