Shamelessly plugging an old post of mine that goes through a few of the theoretical issues.
And honestly, most low level card theft and fraud happens either very close to where the card was stolen anyway or online. In one specific case I know of, skimmed at ATMs around Chelmsford turned up attempting cashback at M&S in Chelmsford. In another case, card details stolen from an online merchant were used at O2 to buy pay as you go topup because at the time, O2 had incredibly relaxed fraud checks for pay as you go. On Twitter, I’ve seen screenshots of Mondo users showing feeds full of contactless declines at merchants very close to them after they’ve frozen their card on finding it lost/stolen (Even with regular cards, a fraudster only has maybe 12 to 24 hours maximum to cash out on a stolen card).
Where I see location helping is feeding in to the big fraud engine for international purchases. If the service is sure you’re in the UK, it can be confident in declining a $1,000 magstripe purchase at a jewellery store in a small town in America. On the other side, if the service knows you’re in Sweden, the fraud engine can relax a little on Swedish purchases.