How Bitcoin Stops the Skimmers and Fraudsters

Clever criminals have devised a gadget to steal credit card information, and across the states they have been employing it to everyone’s detriment. The device is called a "Skimmer." The thief places it on top of a credit card card reader of gas pumps or ATM’s, and the skimmer scans or records a credit card and acquires its credentials. Once the crooks obtain the users details, they manufacture a working, but fraudulent replica of the card.

This is just one example of various ways that thieves devise to maliciously acquire other people's sensitive information. But this method is noteworthy for how easily it takes advantage of printed details at public locations. The “Skimmer” is just an electronic device with a camera affixed to a pump or ATM, and then pointed down at the card or information on the screen. The frightening aspect of these nefarious tools is that they look uncannily like the machines to which they are attached.

One of the primary downsides of modern economic interaction, then, is that people constantly have to divulge their name, card numbers, addresses, social security numbers, and other details. This lack of anonymity in the current environment is a huge risk for businesses and individuals alike, because their information is constantly exposed to criminal elements.

On the government’s web page, the Bureau of Justice reports that 16.6 million, over 7% of the total population above the age of 16 had their identity stolen in 2012. Identity theft also includes the fraudulent use of preexisting account information, such as credit cards and banks. In another example, the U.S. Secret Service estimates that ATM Fraud in 2008 totaled to $1 billion.

So what is the fix? How do people stop this theft of their hard-earned money? How do they combat the skimmers and fraudsters?

A Radical Solution: Cryptocurrency

The solution already exists. Some people might think it is too radical, though.

Abolish credit cards, checks and other payment methods that disclose sensitive and private information. In this day in age, these methods are antiquated and useless. There are too many tricks that thieves can use to gather people’s information without hassle. Once society stops using the old system, other payment methods can be adopted to reduce fraud.

Luckily, this type of technology already exists. It is called cryptocurrency. The most popular and coveted one is known as Bitcoin. It is a workable fix for fraud prevention, because it functions quasi-anonymously. When someone pays with Bitcoin they are not giving out any sensitive personal details, because all that is needed for a transaction is a public key or the corresponding QR code. This is the nature of the technology; it was built to protect the individual. It also eliminates the need for a clearing house or middleman to oversee secure data. Information can thus be kept in utter secrecy, because a person acts as his own private bank, without publishing anything at all.

A “Push” or “Pull” System

This illustrates the difference between a financial “push” and “pull” system. Bitcoin is a push system, which means funds can only be pushed out from the end user or holder of private keys. No other institution or person can pull money out from a Bitcoin wallet holder. This implies that thieves cannot arbitrarily take money from a Bitcoin account. They especially could not use skimmers at a gas pump or ATM that accepts or deals in Bitcoin. Central bureaucracies and banks can’t even freeze or take funds from individual user accounts. In other words, the push system is the sine qua non of secure micro economic interactions. The pull system, on the other hand, allows money to be taken (or pulled) from accounts and used arbitrarily by others, because it is controlled by outside sources and information about that account is essentially public; it is accessible to nearly anyone given the right circumstances.

This is a horrible situation to be in, but cryptocurrencies are the answer to the problem. Not only will Bitcoin based gas pumps and ATM’s put an end to fraudulent skimming, but all manner of fraud will be reduced under the protective insulation of Bitcoin. However, this does not imply that Bitcoin will be perfect. In theory, there are plenty of ways people could defraud others out of their crypto-money, but Bitcoin technology is currently light-years ahead of any would-be criminal.

Let everyone make the crypto-transition then. Everyone’s pocketbook will feel safer.

The time is ripe.

Do you believe that cryptocurrencies will be a clever answer to our fraud problem?

Sources: http://www.bjs.gov/content/pub/press/vit12pr.cfm
http://krebsonsecurity.com/all-about-skimmers/

Sterlin Lujan

Cash-Back VS Bitcoin: Why Bitcoin can be Superior

Bitcoin is fighting an uphill battle against the current financial ecosystem, and that ecosystem is fighting tooth and nail to keep its dominant position over alternative payment methods. Whereas financial institutions can offer customers a cash-back service for every purchase, Bitcoin users can not enjoy a similar service at this time.

Also read: Bitcoin the Next Logical Step in the Rise of Unbanked Mobile Payments?

The Blessing and Curse of Debit Card Cashback

It is important to keep in mind that cash-back services only work with debit cards, and not with credit cards. There is a vast distinction between both cards, as credit card transactions are subject to transactions fee based on a percentage, whereas debit cards fees are tied to a fixed amount. This makes a huge difference for a merchant who accepts both types of card transactions.

Debit cards are issued by banks and other financial institutions and are not related to interest-free credit funding like credit cards. However, debit cards are not all that popular in every country. The United States, Belgium, France, United Kingdom, Canada, and Australia are a few countries where debit cards are being used on a semi-regular basis.

The way a cashback works is as follows: an amount is added to the total purchase price of a transaction paid by debit card. That customer will then receive this added amount in cash upon completion of the purchase. Most retailers will use this feature in order to reduce the amount of cash stored in the cashier’s till, saving the retailer money in deposit fees at the bank.

Cashback Rewards For Credit Card Holders

Even though cashbacks are officially impossible with credit cards, a similar service called “cashback rewards” was created many years ago. These incentive programs are usually operated by credit card companies, and virtually promise customers to pay back a small amount of money for every purchase made. Sometimes, these rates can be expressed in percentages, but some countries will express the value in fiat currency as well.

Both percentages and flat cash-back values sound great, and will allow customers to earn a bit of money while spending. But one of the biggest downsides to this problems is that people will go out and spend money just to get their cash-back bonus, and not spend money because they actually need certain goods or services.

Some credit card issuers will offer cash-back rewards in the form of air miles, or points, encouraging credit card holders to use their card more and more for all types of purchases. However, monetary returns are most preferable, which are paid out on an annual basis -- either credited to the credit card account or paid out to the cardholder separately.

Last but not least, it is important to keep in mind that cashback rewards are more beneficial to certain people compared to others. Cardholders who pay their credit card bills on a monthly basis benefit more from these rewards, as they will not invoke interest fees if a monthly amount is not paid off in full within a certain time frame.

Bitcoin can Offer Neither, but Discounts are Possible

Every time you make a Bitcoin purchase, there is no cash-back option. Asking a merchant to add a specific amount of money to the transaction and receiving it in cash is simply impossible. Getting some sort of cash-back off the purchase amount itself -- either in money or otherwise -- is not something you’ll see in the world of digital currency.

In fact, you could go as far as saying that cashback systems -- both for debit cards and credit cards -- are nothing but a convenient tool to keep customers tied to a financial ecosystem tightly controlled by banks and governments. If there is one thing consumers love, it is convenience, even if it trumps security, financial freedom, and the simple principle of having choices.

But there is one advantage Bitcoin can give that neither credit cards nor debit cards can, and that is discounts at the time of purchase. Because merchants can save a ton of costs by accepting Bitcoin, compared to credit and debit cards, they have an incentive to offer a small discount to customers paying with BTC. However, these discounts are vary rarely given at this time, and we can only hope that situation will change soon.

Buy your first bitcoins today by visiting our Buy Bitcoins page where you can choose from verified bitcoin exchanges from all around the world!

What are your thoughts on cash-back options and Bitcoin discounts? Let us know in the comments below!

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The opinions expressed in this article are not necessarily those of Bitcoin.com.