Dispatches from Actually Existing Capitalism

Recently I had to make an extra trip to my bank because my debit card was used at a location suspected of fraud. If you have had this experience then you know that no one at the bank will tell you what location is suspected. It is a matter of policy at every financial institution with which I have had dealings. Why is this frustrating? Well, part of what is required for a “free market” to function is relatively easy access to information so that consumer choices can be at least partially made on rational grounds (I submit that there are emotional and prejudicial factors in almost all consumer decisions, but that’s another story). So, as a consumer who is trying to be at least somewhat rational and at least somewhat informed about how I participate in this economy, I would like to know which businesses/ATM locations facilitate fraud artistry. Who is lax in their security? I should have the ability as a consumer to avoid giving any of my business to companies whose practices allow others to steal from me.

Why do banks circle the wagons and protect businesses that don’t protect their own customers? I suspect that this arrangement was agreed upon by the banks and by Interac (the company in Canada that processes debit card transactions, and that is itself a creature of the banks) in order to proliferate debit payment. For consumers though this creates at minimum an inconvenience in the form of having to replace debit cards and at maximum the risk that they could be victimized by theft. Bad businesses are protected from their malpractice by the banks.

Now, you might be asking what the alternatives are, but there are few. Most employers prefer direct deposit as means for paying their employees, many even require it, so it is very difficult to avoid the banks if you want to work. Now there’s nothing to stop anyone from then withdrawing cash and making all their purchases in cash, except that bank hours are so reduced that again it’s probably going to require that an ATM transaction be made. So while it may be possible to entirely boycott the banking system, it is the sort of thing that is rather impractical and therefore the banks can continue to protect fraudulent businesses. It is unlikely that any competitor for Interac would emerge since the current conglomerate is 1) huge and 2) enmeshed with our current banks. The barriers to entering an industry such as direct payment are almost insurmountable and it’s not at all clear that businesses would opt to participate in a system that would risk their reputations by exposing them.

None of this is government-mandated and there are no government rules that stipulate that businesses that hire and protect fraud-artists must be protected from public exposure/shame/loss of clientele. This is merely another instance where markets 1) tend towards collusion/oligopoly/monopoly in a way that rips off consumers, and 2) work to prevent consumers from making informed decisions.