This happens because the cost of developing (or buying) good software and people to build a decent anti-fraud system is very clear to measure and the impact of the false positives is not. Also, as credit card fraud is usually the bank's responsibility, it makes sense for the leaders of that area to go towards more false positives than false negatives.
But it does not need to be that way and the government can and should help.
In my country (Brazil) banking is well regulated industry and we also have some good consumer laws. Both those things help a lot to show a clear impact of badly designed anti-fraud system to the banks. For example, the central bank has an online channel, where you can open a complaint, which the bank is obligated to answer/solve in 5 days and might get fined millions if they get lots of valid ones.
I used to get my card denied very often, with no heads-up or call to confirm. So I raised a complaint at the Central Bank, got an apology letter and call from my bank manager and I never again had my credit card blocked anywhere.
My problem is different, the bank approve my payment after 3D secure check, the offender is the service provider, they cancel the order and issue a refund with a vague statement!
But it does not need to be that way and the government can and should help.
In my country (Brazil) banking is well regulated industry and we also have some good consumer laws. Both those things help a lot to show a clear impact of badly designed anti-fraud system to the banks. For example, the central bank has an online channel, where you can open a complaint, which the bank is obligated to answer/solve in 5 days and might get fined millions if they get lots of valid ones.
I used to get my card denied very often, with no heads-up or call to confirm. So I raised a complaint at the Central Bank, got an apology letter and call from my bank manager and I never again had my credit card blocked anywhere.