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Comment by JimmaDaRustla | Hacker News Reader

Just off the top of this article - BestBuy wouldn't be liable for that $1000, it is the FIs liability, if we're talking about a transaction at a physical terminal, not CNP.

Edit: FIs also have to follow rules and regulations to monitor and predict fraud activity.

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Jason here, op (and CEO of Sift Science). It wasn't quite clear in the article - in the example of the stolen television, there is a key difference between Best Buy and bestbuy.com. In the latter, the merchant takes the hit on fraud (e.g. $1000 will be subtracted from the bank account of bestbuy.com), whereas in the former, the merchant is off the hook for fraud. This is one of the key differences between Card Present (offline) and Card Not Present (online) transactions.

I've contacted the reporter to try and clear this up.

Edited this comment - misread your comment. Correct, thank-you for the feedback!

Edit #2 - when you say offline/online, I'm assuming you mean in terms of an online store, versus a physical retail store.

I took it as if the transaction was done in realtime to the backend FI system, or if it were verified offline at a terminal. In EMV terminals at a physical merchant location, transactions can be either online or offline ;)

It actually depends on whether you're in a card-present or card-not-present situation. For historical (i.e. irrational) reasons, merchants are responsible for fraud in the CNP situation.

Correct - I always assume terminal based transactions when it comes to fraud.

You are not correct. BestBuy is absolutely liable for that $1,000. If they ship the TV to the fraudster, the TV is gone and the $1000 is gone, too.

When the actual owner of the credit card charges back, the $1000 BestBuy received is automatically taken from their account (or subtracted from their next settlement).

FIs do try and predict fraud, but they do a very poor job of it. In the ecommerce space, the merchant is liable for, essentially, all fraud.

I was meaning in a physical transaction, where the customer pays at a terminal.

I guess I spoke out of context!

That's exactly wrong. Barring some sort of insurance, merchants eat the cost of fraud. This is the incentive for some of the weird behavior and lack of progress when it comes to CC transactions in the United States. Ideally Sift's clients would be the banks, since they've got all the money, but the banks can foist most of the cost of theft onto someone else, so...

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