> Drawback: this doesn’t work until you have history. New accounts have no baseline.

This is an underrated CX factor: If my card gets denied when i’m a new customer or exhibiting a new pattern, i’m impressed with their software.

However if they deny a transaction where there is any previous history of me authenticating, then I’m frustrated by their naive paranoid algorithm.

The incentives of the bank is to cut fraud.

Fraudulent transactions will eventually cost the bank (when they would have to reverse/reimburse it and eat the loss). A denied transaction only results in an angry customer who will quickly forget after they complained - so the customer bears the brunt of the externalized cost.

Therefore, the bank's incentive is to err on the side of more caution, and deny transactions when finding false positives.