Card not present transactions offer merchants a new world of sales channels and opportunities. However, the same opportunities afforded by the growth in card not present (CNP) transactions have also created a new domain of risk.
As with any new opportunity to increase revenue, there is an equal opportunity for crime and fraud. This is exactly what has happened with the boom in CNP transactions – CNP merchants are seeing a higher number of chargebacks.
The good news is that you can prevent becoming a victim of CNP chargebacks. With the right knowledge, tools, and solutions, you can prevent and detect chargebacks from happening. In this article, you’ll learn why CNP chargebacks occur, how to respond, and how to prevent chargebacks.
Reasons Why CNP Chargebacks Happen
CNP chargebacks can be attributed to three major reasons. Knowing this makes it easier for you to improve internal and external processes to detect and prevent this crime in action.
- Merchant mistakes. Small errors can add up, making you the perfect target for CNP chargebacks. For example, errors in currency conversion, confusing billing descriptors, outdated product information, or out-of-date return/refund policies.
- Friendly fraud. It is very easy for your customers to commit friendly fraud. All it takes is a quick click of Dispute Transaction on a customer’s mobile app and the chargeback process is started. Merchants who fail to maintain best-business practices and follow recommendations from their credit card issuers can quickly become victims of friendly fraud.
- Criminal fraud. Organized crime has made CNP merchant transactions a prime target. Savvy fraudsters use advanced technologies and tactics to hack databases to steal customer credit card data. This data is sold on the dark web and then used to make fraudulent purchases.
There are small changes that you can make to your website and sales processes to minimize merchant errors and friendly fraud opportunities. However, without the right tools and technology in place to monitor customer habits and purchase methods, it’s impossible to prevent chargebacks from happening. Remember that fraudsters (and this includes instances of friendly fraud) are using the latest in technology to beat your payment system and steal from you.
How to Respond to CNP Chargebacks
The best way to respond to CNP chargebacks is with a thorough, customized approach. Many merchants decide to use every piece of chargeback prevention technology available, resulting in a slow, overly rigid, and cumbersome payment and authorization solution. In doing so, you only succeed in breaking your own website and frustrating honest customers with the slow processing times.
When developing your customized approach to chargeback prevention, make sure your solution is flexible, easily adaptable to changing threats, simple to update, can grow with your business, and can be adjusted for new sales and payment methods.
How to Prevent CNP Chargebacks
Preventing chargebacks comes down to using the right technology at the right time. The only way to do this is to use a multi-layered fraud detection and prevention approach. Do not rely on an out-of-the-box approach – get the right technologies for your unique needs.
When researching fraud prevention and detection solutions, pay attention to these key technologies:
- IP intelligence. Deep analysis of the IP Address used for the transaction to monitor possible risks associated with the location.
- Device fingerprinting. Uses device information and reputation scoring to validate the transaction.
- Address Verification Service (AVS). Verifies the address connected to the cardholder using a comparison look-up.
- 3D Secure. Uses a three-domain model to validate credit and debit card purchases.
- Tokenization. Account and card information is replaced with a secure token identifier.
- Geolocation. The location of the cardholder and the customer are compared.
- SSL. Provides a secure encrypted communication between customer devices and payment solutions.
- Merchant Co-Op. Transactions are compared against a list of orders, looking for matches with fraudulent accounts.
Remember that using every single kind of technology can make things worse. You can contact us to discuss the best options for your unique chargeback prevention needs.
Learning More About CNP Chargebacks
Use these Verifi resources to learn more about CNP chargebacks and chargeback prevention.
- Stop Chargebacks Now on Your Terms
- Guide to Chargeback Management
- Advancing Technology for Fraud Prevention
- You’ve Received a Chargeback – Now What?
- Collaborate to Quickly Resolve Payment Disputes
- CNP Fraud and Your Business