Friday, December 9, 2011

Spend Money To Make Money

You must spend money to make money.

The saying is so old that it is a cliché. It was penned by the best-known poet and playwright of ancient Rome, one Titus Maccius Plautus, who was from Umbria. They called him Plautus, for short, which means something like “Flatfoot”. He might have been a village clown, but he had made and lost money in business before taking up the pen.

His New Style Roman comedies were written at a time when Rome was a very strong Empire, a time in which political satire was frowned upon, much less any kind of public movement like the modern Occupy Wall Street. Plautus was got his licks in by employing proverbs and paradoxes in his writing, his plays are more or less social commentaries.

These times in the United States are not unlike the times in which Plautus wrote his comedies. While we aren’t ruled by a despotic emperor, our government has become rigid and has tuned itself to serve big business, rather than the needs of average people. The populace has by turns been trained either to be complacent or ruled by irrational fears. The least have to pay the most to keep everything running. The greatest pay almost nothing; and in the current world financial crisis, the rich do very little to create what is needed most: jobs for the least so that they can keep everything running.

You must spend money to make money.

This holiday season, one of the latest in a series of discoveries of crime and corruption is a debit / credit hacking scheme in which alternative computer boards have been surreptitiously placed inside self-checkout stands located in fairly large number of California chain stores, one of which is located in my town. Customers’ accounts have been hacked and there are claims pending. Some of the banks are waffling about dealing with the debit card claims.

U.S. Banks and the credit card industry are making money hand over fist. There has never been a time in which the industry has had more power and less regulation. And yet, the industry is reluctant to help clients who have sustained losses due to debit fraud. While other countries have gone over to “smart cards” with encrypted chips and enhanced PIN technology, the U.S. banking and credit industry continue to make the most of old magnetic strip technology. This older technology is much less secure. In essence, the hacker remotely records the account information and PIN number from the magnetic strip swipe and creates a duplicate card, which can then be used fraudulently.

You must spend money to make money.

Investing in upgraded technology is the cost of doing business. Is this not what we have been told? The industry, however, is not investing in its business or its customers. In fact, the industry charges its clients the cost of doing business by way of hidden and escalating fees.

Plautus also wrote:

You're asking for water from a pumice-stone.

The industry is making no move to convert to chip and PIN "smart card" technology. Why? Because the cost of doing business is upwards of  $9 billion.

Plautus again:

The poor man who enters into a partnership with one who is rich makes a risky venture.

That the industry needs to start investing in the security of its customers is obvious, but don’t look for it to happen soon. Banks and merchants will have to upgrade or replace all payment terminals. Banks, will have to spend significant amounts of money to roll out smart cards to customers.

So, what do we do to protect ourselves? The banks lamely tell us to make all of our transactions be the credit type, as our PIN numbers cannot be accessed during such transactions.

The Secret Service is investigating these hacking schemes. Good luck with that! 

In the meanwhile, holiday shoppers and buyers beware! 

To quote Plautus once more:

Dictum sapienti sat est.

A word to the wise is sufficient.