Payment Fraud Prevention for the Rising Risk of CNP Transactions

February 24, 2018

Payment fraud is a known risk whenever a transaction is made. The potential for fraud when a card-not-present (CNP) transaction is made can add risk. A CNP transaction takes place when a purchase is completed without the cardholder or his or her credit card being present. This means that a transaction is made without a person physically handing a credit card to a merchant. Why are CNP transactions necessary? There many reasons why a consumer may need to make a purchase without being physically present. Here are the most common forms of CNP payments:

  • Telephone
  • Mail order
  • Electronic
  • Mobile

CNP transactions require all of the same information that a seller would see if they were physically holding a card. This includes the credit card number, the expiration date of the card and the security code. In addition to the information on the physical card, CNP transactions also require personal billing information that matches up to what is associated with an account.

Payment Fraud Prevention for the Rising Risk of CNP Transactions

Why CNP Payments Are Vulnerable to Fraud

CNP payments are particularly vulnerable to fraud because criminals can make purchases using stolen credit cards or credit card numbers. In fact, a criminal doesn’t even need to have a credit card in their hand to make a fraudulent transaction using a CNP payment. If a criminal has access to a victim’s account information, they can complete payment. This is why scams involving card skimmers have become so common in recent years.

How Merchants Can Guard Against CNP Payment Fraud

Counterfeit activity is increasingly happening online. Enterprises rely on CNP transactions as a revenue stream. Successful payment fraud prevention boils down to proper screening. By utilizing a data platform that is capable of processing, analyzing and reporting on the data that is collected during a transaction, the risks of payment fraud can be mitigated. Businesses should employ big data analyzation systems that can process algorithms to screen for high-risk transactions or patterns that suggest that fraudulent activity is taking place. By establishing internal baselines, the risk of payment fraud is greatly reduced. For CNP payments in particular, enterprises should recognize risk and work towards automated systems to present red flags when anomalies occur.

CNP payments also run the risk of chargeback fraud in cases where purchases are shipped to the recipient. Chargeback fraud occurs when a customer falsely claims that they have not received a product or service from a merchant. A customer can falsely claim that they did not authorize a payment to a merchant. The customer would then be able to file a chargeback claim and have the money taken back from the seller’s account. This is one of the most difficult forms of fraud to combat because mistakes regarding orders do sometimes happen. Trying to get to the bottom of a chargeback claim can take investigative work and research. Enterprises lose millions of dollars each year from this type of fraud.

Payment fraud is a complex problem for enterprises to tackle. By using proper data analytics and tracking systems, businesses can more easily detect CNP transaction fraud.