Keeping Your Credit Score at 98.6 Degrees

Just like a fluctuating body temperature is an indicator of your underlying health, your credit score is a similar measure of your financial well being. Yet, in a recent poll of Facebook users age 18-24, we found that fewer than 20% had seen their credit report or credit score within the past year (see note 1, 2).

Furthermore, today's tightened credit market has put a premium on having a good credit score, even in the upper end "prime segment." Here's the tease from the top of the Personal Journal section of today's Wall Street Journal, "Lending squeeze raises the bar on credit scores." (article here, see note 3).

Clearly there is a need here. Most U.S adults, especially younger ones, should track their credit score at least quarterly. However, fewer than 10% of adults subscribe to credit monitoring services, partly because of their cost and partly because of the hassle (see note 2).

Banks, credit unions and card issuers are ideally suited to fill this gap. At a minimum, low-cost one-click access to their credit score would provide customers with an important early warning system to stave off potentially debilitating personal finance woes (note 4).


1. Be aware that this is a completely unscientific online poll of 200 Facebook users who say they are age 18-24 in their Facebook profile. The results should NOT be projected to the larger population. It was conducted on July 23, 2007 by Online Banking Report (see note 2).

2. For more information, see the latest Online Banking Report on Credit Monitoring.

 3. And over at another Dow Jones effort, the FiLife blog, the writers have been on a bit of a mission to pressure banks and card issuers to make credit scores freely available to customers (see post here). FiLife is a joint effort between Dow Jones and IAC, the parent of Lending Tree and GetSmart.  

4. According to the FiLife article cited above, among top-10 banks, only WaMu currently provides free access to credit scores for its credit card customers (see inset).

The Aging of Facebook Makes it a More Appealing Platform for Financial-Services Firms

Facebook traffic from comScoreDue to Facebook's roots as a college-only social networking site, as recently as last year you had to use a .edu email address to gain admittance, it has remained a young person's playground much longer than MySpace. However, much to the chagrin of my college-age niece and her friends (note 1), Facebook has aged rapidly this year.

As you can see in the inset, in May, comScore reported that more than half of Facebook visitors were 25 or older (see full press release here and note 2). Using this chart, we estimate the median age of a Facebook visitor was about 23 a year ago and now it's closing in on 30 (I'd guess 27 or 28 based on the comScore data). Even more frightening for the younger set: last month there were 2.6 million more unique visitors over age 35 than in the 18-24 category. We noted this trend at MySpace last year (here).

Significance for Banks
As you consider your social networking strategy, don't think it's only for the under-25 crowd. Some of your prime customers, the 30-somethings with new families, new cars, new homes, and accelerating careers, also keep in touch with friends via social networks. Refer to Online Banking Report, Social Personal Finance, for a long-term forecast and strategic options for financial institutions. Also, see our earlier post on the Top-10 Banking & Money apps on Facebook here.

Facebook Lingo Defined
For those of you new to Facebook, Ad Age ran a sidebar off its lead article this week, This 23-Year-Old has Google Sweating, explaining a few key Facebook terms:

  • Minifeed: Like an RSS feed, that automatically updates everyone on your friends list of any changes you make to your profile, including removing items. This feature caused a bit of a revolt, due to privacy issues, when introduced last year. But now it seems to be an important part of the network. It's especially critical for the viral spread of new applications such as Lending Club or Chipin. Unless they opt out, every time a Facebook user adds an application to their account, all their friends are notified in the mini-feed.
  • Poke: The virtual equivalent of smiling at a co-worker passing in the hallway; a way to connect with someone without the more formal protocols of email, text, or voice messaging.   
  • The Wall: A place to write comments on your friends profile, or respond to comments on yours.
  • Tag: Allows users to associate names with the people in the pictures they've posted. As Ad Age says, "a college grads worst nightmare when it comes to the ever-crucial job search."


1. This summer, my niece, a college sophomore, couldn't believe that I had a Facebook account. And she was more than a bit skeptical of my claim that I was tracking the social network for my blog and newsletter. To her, it's a privileged place for her friends to communicate: uncles, aunts, and especially parents, are definitely not on the invitation list. It will be interesting to see what happens to the hip kids as the establishment invades their turf. The Wall Street Journal had a similar story this week about fellow workers and even bosses requesting to be added as friends in social networks (here).

2. comScore is reporting the demographic profile of visitors, NOT the active-user base, i.e., those that maintain profiles. Active users would undoubtedly skew younger.

Compete’s May Online Financial Shopping Scorecard

Last month, we introduced the Financial Services Monthly Performance scorecard produced by Compete. Here's the second installment, summarizing the overall performance of 23 large U.S. financial institutions and lead-generation sites. For more information, including the detailed methodology and companies tracked, refer to that post (here).

The highlights:

  • Financial shopping was down or flat in most categories, especially savings accounts; not surprising given the typical tax-time spike in April.
  • The main exception to the trend was checking, which grew a phenomenal 31% in May compared to April. 
  • The main drivers of checking account growth: Bank of America's promotion of free MyAccess Checking (see coverage here) and, to a lesser extent, Wachovia, whose Google/MSN marketing caused a major spike in traffic
  • But it wasn't all rosy in checking accounts: While BofA was experiencing 25% growth in applications, ING Direct went through a typical post-launch downturn with a 50% decline in application volume
  • Credit card conversions were up dramatically, with a 5% increase in application volume despite a 6% drop in shoppers, resulting in a 22% conversion ratio (see note 1) 


1. Compete revised its card applications show in the previous report. The revised number of card applications:
     March 2007: 1.57 million instead of 1.71 million
     April: 1.70 million instead of 1.88 million with 8% growth instead of 9% 

New Online Financial Services Performance Metrics from Compete

Link to Compete website The researchers at Compete Inc. have developed a new scorecard that tracks the overall performance of 23 large financial institutions and lead-generations sites (note 1). We will publish this scorecard each month here at NetBanker and we will occasionally drill down into the data at Online Banking Report. To make it monthly scorecard easy to access, it will have its own category, <>. 

There are a number of interesting insights from this data:

  • Card applications were up 9% even though shoppers only increased 1%, helping push conversion to a healthy 21%. In this case "conversion" means they APPLIED for the product. We do not know whether they were approved or not.
  • Checking applications were up 24% to 182,000, with the launch of ING Direct's Electric Orange having a role in that.
  • Home-secured loan activity was up sharply from March, increasing 30% in the refi and home equity categories. Purchase loans were also up 23% month-over-month.


1. Companies tracked: 

Credit cards: American Express, Bank of America, Capital One, Chase, Citibank, Discover

Deposits: Bank of America, Capital One, Chase, Citibank/Citi Direct, E-Loan, Emigrant/Emigrant Direct, HSBC/HSBC Direct, ING Direct, U.S. Bank, Wachovia, Washington Mutual, Wells Fargo

Home Loans: Ameriquest, Bank of America, Capital One, Chase, Citibank, Countrywide, Ditech, E-Loan, LendingTree/GetSmart,, LowerMyBills, National City, NexTag, Quicken Loans, Washington Mutual, Wells Fargo

2. Definitions:

Shopper: Consumer who visited product-related content at a site in the competitive set. For the purposes of this Monthly Performance Update, a consumer can be counted for each site they visit. 

Application: Any Web form requiring the consumer to enter personal info including Social Security Number; counted only when completed.

Lead: Any Web form requiring the consumer to enter personal information, not including Social Security Number; counted only when submitted.

Conversion: = (Leads + Applications) / Shoppers

3. Methodology:

Compete's projections are supported by industry-leading data management and technology. The consumer and industry data is drawn from numerous sources and comprises the largest continuous consumer behavior database in the industry. Its proprietary data methodologies and patent-pending technology aggregate, transform and normalize this data and ensure it is representative of the entire U.S. online marketplace.

People are recruited to join Compete's member community through, the first website to help consumers personally benefit from clicksharing. Consumer data is also licensed from national ISPs and ASPs. This multi-source data collection methodology sets the industry standard for representative and actionable data. Members are protected by Compete's stringent privacy policy and data collection techniques that purge personally identifiable information.

One-quarter of 50 Largest Online Advertisers are From Financial Services

Link to by Experian It's no surprise that financial services companies are some of the largest online advertisers. It's been that way since the medium began accepting advertising in 1995. However, you might be surprised who was the number 1 financial-services advertiser in 2006: Experian with $128 million, 50% more than Microsoft's $82 million. Only five companies spent more online in 2006: Vonage, AT&T, Dell, Disney and GM.

The credit bureau and direct marketing company has expanded its direct web-based financial services presence via acquisition over the last few years and now owns prolific advertisers such as and

Most financial companies in the top-50 were in the brokerage and investment category with TD Ameritrade, Scottrade, E*Trade and Fidelity all in the $100 to $120 million category. Non-brokerages included IAC/Interactive parent of Lending Tree and GetSmart, American Express, Capital One, Bank of America, and the biggest surprise in the top-50: LoanWeb with $37 million, more than any retail bank in the country, except BofA. 

Here's the financial services companies in the top 50. Data in from TNS as cited in Online Media, Marketing, & Advertising Magazine (OMMA) last week (here). Previous NetBanker coverage is here.

Overall Rank/Company/2006 Online Advertising Expenditures

6   Experian               $128 million
9   IAC/Interactive    $123 million (includes non-financial products)
10  TD Ameritrade     $120 million
14  E*Trade                $107 million
15  Scottrade             $105 million
18  Fidelity                 $98 million
23  American Express $80 million 
25  Charles Schwab    $72 million
29  Forex Capital Markets $57 million
34  Capital One           $53 million
35  Morgan Stanley     $53 million
44  Bank of America    $43 million
48  LoanWeb               $37 million

Source: TNS, 2007

Update on Traffic Numbers

Last week we reported on the apparent traffic spike at person-to-person lender Prosper. Compete’s Snapshot showed Prosper with 1 million unique visitors in March.

Based on that observation, Compete dove into the Prosper numbers and found that the domain had not yet been added to its more rigorous monitoring system, and in fact, there appeared to be some panel bias in the original March traffic numbers. Under Compete’s revised assumptions, Prosper’s March traffic estimate is a third less, just under 700,000 visitors, instead of 1-million plus. 

Also, Compete has now released its April estimates and found that Prosper’s traffic declined 25% to 500,000 visitors. While that no longer puts Prosper at the same level as Suntrust, the lender does have considerably more visitors than the nation’s 23rd largest bank, Comerica (see revised traffic chart below, Prosper is the blue line).

Compete traffic estimates

Prosper Traffic Spikes, Hits Major Bank Levels

Prosper homepage Preparing a table for our upcoming report on social finance, we were slogging through website traffic at and discovered a startling statistic. In March, traffic to the person-to-person lender was four-fold that of January, growing to more than 1 million unique visitors. That puts it in rarefied company, approximately the same as a top-20 bank such as SunTrust, which according to Compete had just 10% more traffic in March (see chart below).

If those numbers are accurate, and they weren’t driven by unsustainable events such as a a mentions in major blogs or media, Prosper may have moved past the early adopter stage, and into the more mainstream web-based financial services arena.

It appears the traffic is converting to registered users. The last time we checked, April 25, the homepage said it had 240,000 registered users. Today, it says 270,000. That’s 12% growth in 15 days.

Jupiter and Compete Reach Opposite Conclusions on Current U.S. Demand for Mobile Banking

Market research is an amazing thing. You can take the same study and reach two entirely different conclusions. Or you can achieve totally different results by the way the question is worded, what multiple choice answers are provided, what questions preceded it, or even the tone or style of the interviewer. Then there are issues with how the sample was selected, online vs. phone, whether it is representative of a national audience, whether incentives were provided, etc. etc. etc.  

That's not to say that market research should be ignored. Just that you need to be careful with it. And if you make decisions based on market research, you need to understand how and when it was collected, what the exact questions were, and who underwrote the study.

Case in point: Mobile banking demand

In the past two weeks, two reliable research companies, Jupiter Research and Compete, Inc. released research finding on whether U.S. consumers think they will want to use mobile banking when it becomes available. This type of "what if" question is even more problematic than other types of market research. Because the participant doesn't use the service in question, the interviewer first has to paint a picture of what it might look like at some future point, then ask the respondent what their level of interest is. So, the results are highly dependent on how the hypothetical service is described, and if it's a telephone interview, how enthusiastic the questioner is about it. Imagine the difference in response to these two questions:

1. How would you like to press a button on your cellphone that gave you instant, secure, free access to your bank account balance so you didn't ever bounce a check again?


2. At some point in the future, you might be able to download and install a Java application over the air for your mobile device that provided a subset of the functionality of online banking ported to a 2 inch screen. And, as long as you never left your phone somewhere by mistake, it should be as secure. How excited would you be about that?

Unfortunately, I haven't seen the exact questions or methodology used to produce the following press releases, so I can't say exactly how the companies reached their conclusions. However, Compete will be presenting their finding in a free webinar Thursday, so you might want to listen in. If you can't make it, I will file a followup blog post. Full disclosure: After spending much of Q1 researching and writing about mobile banking and payments, and yes, selling reports of my findings, I'm firmly in the pro-mobile banking camp (see previous coverage here). 

Finding 1: Considerable interest in Mobile Banking

Author: Compete, Inc.


Synopsis: In an April survey of online banking users, only 19% said they would definitely not use it, while 11% said they definitely would. The vast majority (70%) between the extremes need more info before they decide. There is a measurable advantage for the negatives (38% won't/probably won't use) over the positives (29% will/probably will), but that's doesn't seem particularly negative for a service that does not yet exist.

Note: Compete will be presenting the results in a free webinar Thursday, May 3, at 2PM Eastern. Presenters: Paul Zeckser, Director Financial Services Practice & Ryan Burke, Director, Telecommunications and Media Practice

Compete results

Finding 2: Little interest in Mobile Banking

 Author: Jupiter Research


Synopsis: Limited data was released to the public, but in a press release last week, with the title, JupiterResearch Finds Limited Consumer Interest in Mobile Banking, the company said only 8% of consumers were interested in mobile banking. No supporting data was provided. We will invite report author Asaf Buchner, who I respect greatly, to provide more background on Jupiter's findings.

Note: Below is the exact quote from the press release. The specific scenario here, "using mobile browsing to check account balances," may be part of the reason for the lower interest. Only about 10% of U.S mobile phone owners use mobile browsing today.  

Just eight percent of online consumers who own a cell phone are interested in using mobile browsing to check account balances.

Online Banking and Marketing Statistics from Net.Finance

Net.Finance 20007 landing page Since I'm a numbers junkie, whenever I'm at a conference, I try to note as many meaningful statistics as possible. By meaningful, I mean a number that provides an outsider with some insight into the business. Merely saying, "we beat our expectations by 63%" does NOT qualify, unless the speaker also shared their expectations. 

The flow of numbers was about a bit below average during the three days I attended Net.Finance, but the two professional researchers on the agenda, Jim Van Dyke of Javelin Strategy and Asaf Buchner of Jupiter Research, delivered slides chock full of statistics. I will check with them to see if they are willing to share with our readers. 

Here's some of the nuggets buried in the presentations from the other experts on stage: 

Most Eye-Opening Stat

  • Link to Prosper homepageDuring the past 14 months, more than 280,000 messages have been posted on the discussion forum, according to CEO Chris Larsen (see here for Colin Henderson's complete notes on this session).

    My take: That's an amazing level of consumer engagement with the new lending platform. To put that in perspective, Wells Fargo's Student Loandown blog has received 98 total comments during its eight months online.

Best Stat to Drop in a Business Case:

  • Link to VerityCU homepageShari Storm, CMO, Verity Credit Union, said that 1% of its new members named the blog when asked how they heard about Verity; the new members had an average of 2.7 accounts with $9,000 in deposits and $11,500 in loans (excluding mortgage); furthermore, the CU's blog, launched in Dec. 2004, now has 1,000 readers (see here for Colin Henderson's complete notes on this session)

    My take: While I don't recommend trying to turn this single data point into an ROI calculation, it's the first time I've heard a financial exec say something about blogging that the finance folks will appreciate (chalk up another first for Verity).

Stat that Most Contradicts My Previous Position:

  • Link to Vancity's changeeverything blogVancity's blog, launched commercially in Sept 2006, now has 1,000 registered users who've generated more than 2,000 blog entries and comments; in total, the site has had 45,000 unique visitors according to William Azaroff, Interactive Marketing Manager (see here for Colin Henderson's complete notes on this session)

    My take: Despite my reservations about whether it would gain traction without a financial services perspective (see our Online Banking Report on Bank 2.0 here), Vancity's unique blog has gained a small, but growing, worldwide following, and, more importantly, has contributed measurably to Vancity's efforts to help its community and create positive brand positioning for the CU. Nice work.  


  • Key Bank's most popular podcast, top stock picks by John Caldwell, has recorded 70,000 visits and 12,000 unique users, according to Interactive Marketing Manager Mickey Mencin
  • Colin Henderson, BankWatch blogger and former BMO exec, mentioned that 39% of Canadians are now reading blogs 

Online Marketing:

  • Colin Henderson also cited Forrester findings that 50% of recent financial buyers did 100% of their research online; 30% performed both on- and offline research; and just 20% conducted all the research offline. In Citibank's late 2005 new checking account promotion, the bank gave away 275,000 iPods, according to Charles DeFelice, SVP customer information environment (it wasn't specified if this was the POTENTIAL or ACTUAL number given away, since consumers had to follow through with a number of electronic activities over a period of months in order to qualify for the freebie
  • Jon Kaplan, head of Google's financial services group, said that 60% of Google users have a personalized (Google) page and that 20% of Google search volume originates from these pages
  • GE Money's SVP of Strategy Vincenzo Picone said the company has 300 million customers with $190 billion in assets across 54 countries which led to a net profit of $3.5 billion in 2006; the company has 2010 targets for 300 million unique visitors; $20 billion in online originations and 1 billion transactions via the online and mobile channel
  • U.K.'s Lloyds TSB experienced a 71% revenue lift (against a control) on its homepage by implementing Touch Clarity's (now Omniture) targeted ad server which uses a number of variables to determine which ads should be shown to an individual visitor; according to Omniture's Brent Hieggelke who showed results from a case study presented by Lloyds TSB at a recent conference

Mobile Banking:

  • Jennifer Vos, director of Citi Mobile, Citibank's new mobile banking service, said that one-third of current Citi customers have input mobile phone numbers into the bank's alert system; furthermore, the new mobile offering was piloted by 100 employees, who have recently been joined by another hundred users in the southern California market

Small Business Banking:

  • Wells Fargo has 150,000 "very active" small-business online banking users according to Eskander Matta, SVP of internet services group; businesses are making $45 million in payments per month with the bank's DirectPay servic
    e launched just a year ago


  • 94% of ING Direct's customers would recommend it to a friend, according to John Owens, Head of Marketing

Online Banking:

  • Customer satisfaction in online banking, while on the rise, still trails online retailing by five percentage points, 78% vs. 83%, according to Larry Freed, CEO Foresee Results

Mobile Payment Metrics: NTT DoCoMo

DoCoMo mobile payments in use In today's special Technology Report in Wall Street Journal, the lead article was "What's New in Wireless," by Amol Sharma. The article's main focus is mobile video and advertising, but there are several paragraphs about mobile payments, mentioning the Cingular/AT&T/Citibank cellphone payment trial through MasterCard's PayPass. The only statistical backup provided was the 1.3 million Japanese mobile users signed up for NTT DoCoMo's year-old mobile credit-card service (note 1).

That number seemed low based on what I've been hearing about the popularity of all things mobile in Asia. It turns out the 1+ million number is just DoCoMo's credit-card slice of the mobile payments pie. 

NTT DoCoMo iD credit card platform In Japan, per capita credit card usage is just one-seventh that of United States (note 2) and stored value is much more popular. DoCoMo has 20 million stored-value mobile wallets in place, 15x the number of credit users. The mobile wallet penetration is approximately 40% of DoCoMo's 52 million wireless subscribers (note 3). 

That's a healthy uptake rate for a product that was introduced less than three years ago. Even the year-old mobile credit card adoption is dramatic given the country has just 130 million credit cards outstanding. DoCoMo's market share is already higher than 1% of total cards outstanding, the equivalent of 8 million accounts in the United Sates (note 4).

Interestingly, part of the reason for the popularity of cash replacements in Japan is that the lowest paper-money denomination is 1,000 Yen, or about $8.80, making coins more common and somewhat less convenient for low-value payments compared to the U.S. and its ubiquitous $1 bill. However, the stored-value mobile wallet is expected to eventually become popular in the U.S. once merchant acceptance grows, especially in the youth and underbanked segments with less access to traditional bank cards; but it won't likely reach current levels of Japanese penetration for another five to seven years (note 5).   


1. According to a Feb. 1 article in the Motley Fool, DoCoMo has 1.5 million users who've applied for and activated the credit card function in their phone. The number of outlets accepting DoCoMo mobile payments was expected to top 150,000 this month. DoCoMo allows other credit card issuers to use its ID platform to delivery card services to its customers. DoCoMo also began issuing its own mobile credit card under the DCMX brand last year. For more information, watch the DoCoMo's video about its mobile wallet (here). The wallet discussion begins at about the 4.5-minute mark of the 16 minute video. DoCoMo's ID credit-card platform and its own DCMX credit card discussion begins at the 6-minute mark and ends a little before the 10-minute mark. The rest of the video discusses i-Mode's international growth and is not directly related to payments.  

2. According the Federal Reserve Bank of Philadelphia, in 2004 American's made 84 credit card purchases annually per capita, vs. 11 in Japan (see report here). According to the online CIA Sourcebook, in mid-July 2006 the population of Japan was 127 million compared to 298 million in the United States.

3. According to the company, DoCoMo has a 55% share of the Japanese cellphone market.

4. The U.S. has about 800 million credit cards outstanding (according to FRB Philadelphia, see #2.  

5. See our forecast in Online Banking Report 138/139 published three weeks ago.

Future Friday: Forrester is Bullish on Online Banking Household Growth

Forrester Research is known for making conservative technology forecasts, doing a great job of not getting caught up in the early hype. For example, five years ago (May 2002), Forrester predicted there would be 38 million U.S. households banking online by 2006, about double the 20 million at the time. That prediction turned out to be about 10% to 15% shy of the actual total (see note 1). 

But in Forrester's latest online banking forecast (here), VP and Bank of America/Wells Fargo veteran Cathy Graebner, is uncharacteristically aggressive. In her report she says the U.S. market will grow to 72 million online banking households in less than 5 years, a 55% increase from Forrester's current estimate of 46 million. If that happens, penetration would be 63% of all households, or 76% of online households (note 2).

In comparison, we are projecting 54 million households, a 30% growth from our estimated 42 million online banking households at year-end 2006. Even our high-end forecast calls for only 62 million, still 10 million shy of Forrester's number.

Normally, Forrester and Online Banking Report track pretty closely. I have a call in to Cathy to see where our assumptions differ (note 3). In many ways, I hope she's right. But I believe there is currently a ceiling for most ecommerce activities at about a 50% penetration rate (of all households), and I just don't see how online banking can move significantly past that within five years. Perhaps mobile access will bump the growth rate 3 or 4 years out, but I still don't think that's enough to get past 60 million households.  

Look at it this way. An estimated 10% to 15% of households don't even have a bank account. If you subtract those from the total, Forrester is saying that more than 70% of U.S. households with bank accounts will be using online banking less than five years from now. That would be great for our industry, but I just don't think it will happen for at least another decade (note 4).   

Read it yourself and let me know which forecast you believe is closer.



1. Our parent publication, Online Banking Report, had similar view at the time, predicting in December 2002 that 43 million U.S. households would be banking online by 2006 (see Online Banking Report #89, published Dec. 10, 2002). Online Banking Report is published by the same company as this blog. According to our latest forecast (Online Banking Report #137), 42 million U.S. households were banking online at year-end 2006.

2. Penetration figure calculated by taking Forrester's 2011 online banking forecast and dividing by our 2011 total U.S. household forecast.

3. I have not read the full report, only the abstract on the Forrester website.

4. The furthest out we project is 2016, where our total still trails Forrester's 2011 prediction (see OBR 137).

Freakonomics Meets Identity Theft

When I saw the blog postings this week that Freakonomics authors, Steven D. Leavit and Stephen J. Dubner, had penned an article on identity theft, I anxiously clicked into the Sunday NY Times Magazine to read the article (11 March 2007, link here). I had hoped that the popular statistical wizards had taken on the subject of why ID theft loss estimates vary by as much as 20-fold, from a couple billion to more than $50 billion (note 1).

Unfortunately, the article, Identity Crisis, shed no light on any of the statistical anomalies nor did it offer any help with definitions, even after using this lead sentence:

There are as many varieties of identity theft today as there are varieties of, say, mushrooms.

The lightly researched article relied on the usual Javelin and FTC numbers and reached the unsurprising conclusion that merchants are the ones that most care about credit card fraud. But the authors glossed over the fact that it's the online merchants who are burned most by card fraud, due to card-not-present chargeback rules (note 2). Real-world card swiping merchants are often made whole for fraud situations provided they followed the card association rules for checking the signature scrawled on the receipt against the 1/8 inch script scribbled on the back of the card (as if that stops much fraud).

The authors also failed to realize, or at least note, that the oft-cited Javelin finding that more than half of ID theft is from people you know, includes only the situations where the victim has knowledge of who perpetrated the fraud. In round numbers, here's what the pie looks like:

  • 50% of ID theft victims don't know who stole from them
  • 25% know who stole from them, but have no relationship with the crook
  • 25% know who stole from them, and the crook was family, friend or co-worker

I believe that it's a bit of stretch to say that half of all identity theft is from related parties when it could be a little as 25% or as much as 75%.  

Blog Comments on ID Theft
Unlike the old days when the only way to interact with an article was a letter to the editor, Leavit and Dubner maintain a blog (here) where readers can sound off on the issues. The blog entry, Who Cares About Identity Theft?, went up on March 9, two days before the full article appeared in the Sunday Times. I was surprised today (March 17) to find only 29 comments on the identity theft piece, especially since the blog has more than 55,000 readers and both the print and online NY Time's columns directed readers to the Freakonomics blog.

And no one seemed to care that the authors did little to further the debate on identity theft, chargebacks, or law enforcement priorities (note 3). In fact, it appeared that only a half-dozen of the commenters had even read the full article. So we have at least a partial answer to the "who cares" question, not the blog readers (note 4).



1. During the past month, I've had conversations with extremely frustrated reporters from the Wall Street Journal and Wired Magazine, who were trying to figure out what the true costs of financial fraud in the U.S. really are. 

2. I have to admit being biased here. As an online-only merchant, I pay large credit card fees, around 3% that cover the supposed "high-risk" nature of online commerce, even though I have zero recourse if the charge is later disputed as fraudulent.

3. The article had conflicting anecdotal evidence on law enforcement efforts to stem financial fraud, saying the FBI usually needed at least $100,000 in losses to get involved. The article implied, but did not explicitly say, that lesser amounts are not pursued aggressively by local police departments. Although it cited an officer from the Los Angeles County Sheriff Department's ID Theft Task Force, which at least sounds like significant enforcement action.

4. It's not so much consumer don't "care," but that they are no longer so interested in discussing it and/or they are less concerned now that many understand that they are well protected against financial loss.