Credit cards were not designed for the internet

Tawanda Kembo Avatar

internet-iidentityAbout $7.6 Billion is lost to credit card Credit Card fraud each year. Now if you’re a merchant, your biggest fear is probably not that someone is going to steal your identity and/or credit card information but rather that a fraudster will use a stolen card to make a payment on your website. That’s because when that happens, the credit card company will say that it’s your fault, and then they will fine you, then they will take that money from you and return it to the credit card owner – a process known as chargeback. Chargebacks can be claimed 3 months after the sale has been made. There is nothing which stops a consumer who is suffering from buyer’s remorse from abusing the chargeback mechanism.

Credit cards, as we know them, were designed in the 1950s (well before the internet was born) by the Bank of America and they were designed to be used when the owner was physically  present with the card at the time the payment is effected.

  1. Accepting online credit card payments is risky
    There is a joke about how on the internet nobody knows that you are a dog. Add to this that you can make a credit card transaction without having your credit card with you and you begin to understand why it’s easy to steal someone’s identity on the internet. Cards can also be stolen.
  2. Accepting online credit card payments is expensive
    1. PCI compliance
      Because of the risks associated with accepting Credit Cards, to begin accepting Credit Cards on your website, you need to go through a process known as PCI compliance to make sure that your website is secure enough to handle credit card transactions. Depending on the way you have set up your online store, PCI compliance can cost from between a few tens of thousands of dollars to the hundreds of thousands. Depending on how much data you store and information you process, PCI compliance can even cost millions.
    2. You cannot choose to cut out the middleman
      It’s impossible to make an electronic payment to someone without going through a third-party or intermediary. The role of the intermediary in the electronic payment was to keep a ledger which allows them to know how much you have sent, how much you have received and how much you have left. Without this intermediary, there was nothing that could stop you from sending money to one person and then sending that same money to another person, a problem known in Computer Science as the double spend problem. The problem with intermediaries is that they have a plethora of fees.
    3. And a plethora of other fees
      authorization fees, interchange fees, Membership fees, Cash advance fee, Photo card fees, Late interest or fees, Statement (paper) fees, Statement re- issuance fees, Card re-issuance fees, Foreign transaction fees, VAT, Fees for loyalty programs or affiliated programs… the list goes on. If you don’t sell anything on online, then you have probably never heard of these. That’s because banks don’t normally charge the card holder but they charge these types of fees to the merchants and businesses who accept your credit card.
    4. Large fees also make it difficult to collect micropayments
      A micropayment is a transaction that occurs online and involves a very small amount of money. Credit card transaction fees make it impractical to collect payments which are less than 1 USD.
    5. Billions of people still don’t have access to the technology yet
      For as long as e-commerce has been around, online have always struggled to collect payments from people in developing countries and other emerging economies. It looks like this challenge is going to be around for a while.


  1. allan

    who cares, its not like we have credit cards in zim anyway!

  2. MKizzle

    Really dumb article. How else do we do ecommerce??? Please do your due dilligence about credit cards and the internet. You can still get defrauded when swiping at a POS or ATM. U just need to put the right measures in place to minimize the risk. You will never get rid of Fraud but u can certainly minimize. I mean WHAT do want??, for us to keep doing cash??? tsk tsk.

    1. Annabelle

      Take it easy guy, he was just highlighting issues around credit cards. He didn’t say don’t ever use them and the article wasn’t just about fraud.
      On another note, I wonder if Bitcoin will ever gain meaningful traction in Africa…?

  3. Robert Ndlovu

    And so what are you suggesting ? EcoCash ? lol
    I have never lost money using a credit card coz I use pre-paid credit cards.

    1. munhu_mutema

      iyoyo prepaid amount yako can get swiped!

      1. anthonysomerset

        his point is that pre-paid cards limits your risk to only the cash you have on the card, so if you dont keep much on the card to start with it wont affect you much

  4. anthonysomerset

    i should point out the credit cards were designed and released before the internet become a commercial reality – they were never designed with the internet in mind as the internet didnt exist when they were first invented – how could they design for something that didnt exist at the time?

    1. Tawanda Kembo

      You stole my thunder :). That’s exactly what I was trying to say. Thanks

  5. Jane Doe

    Really strange article. There is a risk of chargeback with card being present as well – it’s not like every merchant checks ID / signature. Should we not accept credit cards in stores?

    We found a pretty easy fix to a “card not present” problem: credit card authorization forms. Got one off this site adapted it to our needs, problem solved. Never had a single chargeback to pay for!