And what happens when this proxy gets hit with the inevitable torrent of fraud attempts? Either it pretends there is no fraud and gets wiped out. Or it attempts to detect fraud, and responds by freezing accounts etc. Sometimes there are false positives. Now we're back to square 1.
I guess I have a blind spot around subterfuge, so I honestly don't really know all of the ways that fraud could occur.
But I think stuff like materiality comes into play. If 99% of customers are honest but 1% cheat, then even a high amount of fraud from bad players may not affect the bottom line much. The fee would probably be something like 3-4 times expenses to make up for losses like that.
Also the proxy would be in addition to the vendor's fraud checks.
In this scenario, maybe the $400k vendor freeze happens towards the end of the month, and the proxy stops its monthly payment from the other customers until it's resolved. So the ticket gets top priority at the vendor and they either release the funds or give the proxy evidence of fraud.
The big risk there might be getting tied up in court so all payments freeze. So maybe the proxy would withhold a percentage instead of the whole. There's probably math for managing that risk. Writing this out, it feels like people have been down this road, so there's probably a term for this whole evolution, maybe escrow or something.
