[ryani]

If you raise your prices, you drive away legitimate customers but don't drive away fraudsters, since the fraudsters aren't actually paying with real money. So raising your price increases the percentage of fraud you see, which means you probably need to raise your prices further, which further increases the relative amount of fraud.

To counteract this negative feedback loop, assuming the increased prices don't drive away all of your real customers, you can spend the increase on transaction analysis, and turn away customers based on their likelihood of fraud, so you've added inefficiency into the system to help deal with a criminal element, and also likely turned away real sales due to false positives in your analysis.

It's no surprise that these types of merchants are looking for a disruptive technology to remove this inefficiency. Doing so would allow them to charge less and outcompete as well as capture the entire market of people marked as false positives by other merchants.