Saturday, March 11, 2023

Base rate fallacy?

Sucked in by the clickbait headline, I read this article about bank fraud. I'm not sure whether I really learned anything about bank fraud, but it is a useful example for research methodology.

The article says that the UK banks most at risk of fraud are Santander, Natwest, Barclays, HSBC, and Halifax. However:

1. This is based on the number of online searches for terms such as '[bank] + fraud number'. It's not clear how reliable an indicator that is of fraud cases. It might be that some banks have this number more easily available from their home page, and that may skew how many people need to search.

2. There's no indication that they take account of how many customers each bank has, but that's surely significant in drawing any conclusions about risk of fraud. For instance, they report that Santander had 11,690 searches, but Natwest 11,480. This is only a small difference at best, but what if Santander had twice as many customers as Natwest? In that case, the odds of fraud (assuming that's what is being measured here) would only be about half...

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