The boom in e-commerce and m-commerce has resulted in new demands on merchants to update payment and authorization solutions. Gone are the days of phone or mail orders – now your customers want to do all of their shopping online.
The online marketplace means reduced overheads and opportunities to sell worldwide, but it also opens you to increased card not present (CNP) fraud risks. It’s more of a challenge to verify the identity of your customers when you can’t see them, talk to them, and verify their credit card signature.
You need to trust the customer, just as the customer needs to trust you. In the early days of e-commerce, many shoppers were reluctant to provide their credit card information online to merchants they did not know. Now, your customers want to shop online and expect guarantees that doing so doesn’t expose them to criminals.
What is CNP Fraud?
CNP fraud is a real threat and it can happen more easily than you may realize. Many merchants are overconfident with their ability to manually notice or detect fraud. Unfortunately, for these merchants, sooner than later they will become victims of CNP fraud.
The first thing you need to know is that you’re the first line-of-defense against CNP fraud. It’s up to you to protect your business from fraud risk. Fraudsters are looking for merchants who have not implemented fraud detection and prevention solutions.
Make sure you’re well-equipped to prevent these CNP fraud tactics:
- Card testing. Fraudsters make small purchases with stolen credit card details to test the data. When the card data works, subsequent large purchases are made from the same merchant.
- Diverted delivery. The delivery is sent to an address that is not connected to the credit card. The address mismatch is not detected by the address verification service.
- Stolen credit cards. Criminals purchase stolen credit card information and use this to make fraudulent purchases.
- Fraudulent gift cards. Using stolen credit card information, criminals buy gift cards and then use these gift cards to make additional fraudulent purchases.
- Online skimming. Criminals look for flaws in your payment solution and then hack the customer data. Criminals use this data to mimic the customer, enabling them to make what appear to be valid purchases.
CNP fraud hurts you in multiple ways, with lost revenue, chargeback fees, shipping costs, lost product, and the costs of fulfilling the order.
How to Detect and Prevent CNP Fraud?
As highlighted above, it’s in your best interest to invest in a proven CNP fraud detection and prevention solution. Not only is there the revenue loss to consider, there is also the damage to your brand and the risk of being dropped by major credit card issuers.
It’s easy to get caught up in the latest news about fraud detection technologies or to attempt to use every tool available. The best approach is to implement a CNP fraud detection and prevention strategy that is as unique as your business.
Consider the following:
- Use the right tools for your business. Not every tool available from fraud prevention experts is going to work for you. Working together we can determine what levels of security you need.
- Use analytics to get the complete picture. Using data insights, you can see what is and isn’t working in your fraud prevention strategy. Know who you’re doing business with, what their purchase habits are, and fine-tune your fraud prevention strategy to meet these demands.
- Be proactive against CNP fraud. Time is of the essence – the longer you wait to review your fraud prevention strategy, the higher your rate of fraud risk. Don’t assume you and your customers are protected – know you’re protected.
There is a range of technologies available that can keep your customer data and payment solution safe and secure. From device fingerprinting technology to AVS to merchant co-op to tokenization – the ideal solution lies in combining the right technologies to give you a customized multi-layered fraud detection and prevention solution.
Learning More About CNP Fraud
Rely on these Verifi resources to learn more about CNP fraud and how it impacts your business.
- Fraud Protection Lessons from Goldilocks
- CNP Fraud and Your Business
- E-commerce Merchants and Fraud Detection
- Secured Data, Reduced Fraud
- The Facts on Mobile Payment Fraud