Monday, February 10, 2014

Credit Card Fraud

Since November when 40 million Target customers had their credit card information compromised, the focus has turned to the fact that the US leads the world in credit card fraud due in part to the use of “decades-old” technology.  The new technology, used in most of the rest of the world, features smart cards, debit and credit cards with an encoded computer chip in place of the magnetic strip on the back.  The chip changes the encryption with each use, making it significantly more difficult for criminals to steal information.  This CBS Evening News story gives all the details, but gives some pretty meaningless numbers as well.

The meaningless numbers come near the end.  The reporter says that smart cards are only effective in stores and may cause criminals to shift their attention to online transactions.  Supposedly, it happened in England when, after issuing smart cards, on-line fraud increased from 23% to 65%.  What seems like a large increase may or may not be.

Think about it using hypothetical numbers.  If there were 1000 cases of fraud in Year 1 and 1000 cases in Year 2, then on-line fraud did jump from 230 to 650 (23% to 65% of 1000).  On the other hand, it is reasonable to assume that the total cases decreased.  Since there were 770 cases of fraud not on line (1000 - 230) and most of those went away due to the better technology, there might have been only 300 total cases both on line and at stores.  In that case in Year 2 there would have been 65% of 300 cases on line or 195, which is a decrease from the original 230 cases.  So there might have been no discernible shift of attention by criminals at all!  If this had been one of those standardized test questions, the answer would have been “e.  Not enough information given.”  But it wasn’t a test question; it was a serious news story, one using incomplete data to imply a still-lurking danger.

Another example comes from Reuters about seatbelts saving children’s lives.  The news is good, 43% fewer children killed on the highways due to increased seatbelt usage over the last 10 years.  With one in three deaths occurring when children are not buckled up the CDC urged parents to “make sure their children use appropriate-sized car seats, booster seats and seat belts on every trip."  The study points out that deaths of improperly secured children differed by race, “nearly half (45 percent for blacks and 46 percent for Hispanics) versus a quarter (26 percent) for white kids."  Is this really necessary?  Are they implying that minority parents are less careful?  I don’t think so.  But the added information not only distracts from the primary message, it also falls into the same “not enough information” category of the credit card fraud example – 45% of how many vs. 26% of how many?

Cases of meaningless or incomplete numbers are not unusual in the news business.  They obviously don’t think it through.  They are counting on us to join them in not thinking it through and to automatically trust their assumptions and come to similar conclusions or, in more sinister instances, to mindlessly accept a false or misleading impression.  It’s critical thinking; not paying attention leads us to go along with rather than analyze and question many false conclusions.

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