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Risks of identity theft: Can the market protect the payment system?

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  • Stacey L. Schreft

Abstract

Identity theft has been a feature of financial markets for as long as alternatives have existed to cash transactions. But identity theft has recently occurred on a much larger scale. Data breaches often involve the apparent loss or acknowledged theft of the personal identifying information of thousands--or millions--of people. ; Identity theft poses risks, not only to individuals, but to the integrity and efficiency of the payment system--the policies, procedures, and technology that transfer information for authenticating and settling payments among participants. Identity theft can cause a loss of confidence in the security of certain payment methods and an unwillingness to use them. Markets can cease operating or switch to less efficient payment methods. Either represents a loss of efficiency for the economy. ; Schreft looks at the nature of identity theft today and the factors underlying its mounting risks. She also explores whether markets are able to limit the risks identity theft poses to the payment system.

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Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (2007)
Issue (Month): Q IV ()
Pages: 5-40

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Handle: RePEc:fip:fedker:y:2007:i:qiv:p:5-40:n:v.92no.4

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Keywords: Identity theft ; Payment systems;

References

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  1. Charles M. Kahn & William Roberds, 2006. "Credit and Identity Theft," 2006 Meeting Papers, Society for Economic Dynamics 34, Society for Economic Dynamics.
  2. Rolnick, Arthur J & Weber, Warren E, 1983. "New Evidence on the Free Banking Era," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1080-91, December.
  3. Julia S. Cheney, 2005. "Identity theft: do definitions still matter?," Payment Cards Center Discussion Paper, Federal Reserve Bank of Philadelphia 05-10, Federal Reserve Bank of Philadelphia.
  4. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
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Cited by:
  1. William Roberds & Stacey L. Schreft, 2008. "Data breaches and identity theft," Working Paper, Federal Reserve Bank of Atlanta 2008-22, Federal Reserve Bank of Atlanta.
  2. William Roberds & Stacey L. Schreft, 2009. "Data security, privacy, and identity theft: The economics behind the policy debates," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q I, pages 22-30.
  3. Stuart E. Weiner, 2008. "The Federal Reserve's role in retail payments: adapting to a new environment," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q IV, pages 35-63.

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