Essays on card fraud, identity theft, and modern payment methods during and post-COVID-19 pandemic

Abstract

This thesis sheds light on how financial crimes affect and are affected by modern payment methods in terms of their adoption and usage. Various empirical strategies are proposed to examine and understand the relationship between the evolution of payment methods and financial crimes, with a particular focus on identity theft and fraud, in light of the global crisis. Specifically, this thesis includes three distinct yet interconnected empirical studies, each using data from a different wave of the United States Survey of Consumer Payment Choice. The first study examines consumer adoption and usage decisions regarding electronic, paper, and card payment methods during the COVID-19 pandemic, focusing on the influence of credit and debit card fraud on these decisions. Employing the two-step Heckman model to estimate adoption and usage decisions simultaneously while addressing any potential sample selection bias, we found that card fraud incidents significantly impact the adoption and usage of specific paper and card payment methods while having no effect on electronic payment methods, particularly online banking bill payments (referred to as online and mobile banking) and bank account number payments. This study also examined the impact of identity theft (both direct and indirect exposure), payment method characteristics, socio-demographic characteristics, and the availability of alternative payment methods on consumer electronic payment behaviour, revealing that the impact of some of these factors varied during the pandemic compared to the pre-crisis period while others remained constant over time. The robustness testing of the primary results, through examining the use of electronic payment methods across various transaction types, revealed that the final effect differs based on the nature of the transaction.

The second study examines cryptocurrency knowledge and adoption, specifically investigating whether cryptocurrency is recognised and adopted as a secure payment method in the COVID-19 era. Therefore, this study examines the impact of identity theft and card fraud incidents on the knowledge and adoption of cryptocurrency. Using the Linear Probability Model, we found that individuals’ exposure to identity theft increases their awareness of cryptocurrencies. This indicates that victims of identity theft recognise cryptocurrencies as a secure payment option. Whereas the exposure to credit or debit card fraud affects cryptocurrency knowledge only when combined with the effects of other financial crimes, including identity theft and other card fraud incidents, as evidenced by joint significance tests. In contrast, the impact of financial crimes, whether individually or collectively, does not influence the adoption of cryptocurrency. This study also examined the impact of convenience and security perceptions regarding centralised payment methods, digital financial behaviours, and socio-demographic characteristics on cryptocurrency knowledge and adoption, noting some similarities and differences in their effects during and before the global crisis.

The findings of the first two studies concerning financial crimes prompt an examination of these crimes from a victimisation perspective. Given the lack of attention to card fraud in the victimology literature compared to the intense focus on identity theft, this study examines debit and credit card fraud victimisation by expanding the scope of Routine Activity Theory, particularly post the COVID-19 pandemic era. This study examines whether modern payment technologies, specifically mobile payment applications, create new opportunities for card fraud crimes. Using the Probit model, we found that the use of mobile wallets (e.g., Apple Pay, Google Pay, or Samsung Pay) increases the probability of both debit and credit card fraud victimisation, whereas the use of PayPal and Cash App increases the likelihood of debit card fraud victimisation. This study also explored financial and socio-demographic characteristics associated with card fraud victimisation, indicating that individuals with below average credit scores, older individuals, women, and non-white individuals were more susceptible to debit card fraud while individuals with above average credit scores, individuals with multiple credit cards, older individuals, and those residing in urban or mixed counties were more likely to experience credit card fraud. Together, these studies provide a comprehensive understanding of the relationship between modern payment methods and financial crimes in the wake of the COVID-19 pandemic.

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Identifiers

ORCID for Farah Saleh Alassaf: orcid.org/0000-0001-7476-3965

ORCID for Ahmad Maaitah: orcid.org/0000-0001-6515-5335

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