Card Not Present Fraud: Definition and Prevention

CNP Fraud

As a business owner, it is imperative that you understand the risks associated with accepting credit cards. Taking this form of payment is pretty much mandatory if you want to avoid losing customers, but that does not mean you should not pay attention to potential fraud.

One of the biggest types of credit card fraud affecting merchants is card not present fraud. Find out what this is and how to combat it.

Table of Contents

Definition of Card Not Present Fraud

CNP fraud occurs when you take a credit card payment without the card physically present and the person using it is not an authorized user. This type of fraud is most common in virtual transactions according to U.S. News & World Report. CNP fraud also makes it simple to bypass traditional security measures, such as chip-enabled cards.

It is very easy to commit CNP fraud because all a person needs to do so is the card number, expiration date, three-digit code and zip code of the card owner. This information is easy for someone to get when he or she is skilled in credit card fraud. It is possible for someone to get this information from your payment system if you do not have proper security in place.

The Effects

When someone commits CNP fraud, the consumer can report it within 60 days and remove his or her liability for any purchases. What this means for you is that you face a chargeback. A chargeback company will assess fees you must pay for the payment not going through. What’s worse is that if you have too many chargebacks, you also have to pay fines.

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To avoid a chargeback, you have to be able to prove the identity of the purchaser. You must show it was the authorized user, which is very difficult to do.

Protecting Your Business

Your best option to protect against CNP fraud and chargebacks is to institute some security measures. There are three good options you can use if you accept payments virtually to greatly reduce your risk.

Biometric authentication uses personal identifiers during the purchase. This includes requiring a fingerprint, which is common on many smartphones. You can also institute retina scanners or facial recognition.

Another option is 3-D Secure 2.0. This process pulls additional identification information to verify what the credit card company has on file. It can also help you to prove you identified the user at the time of purchase.

Stop CNP Fraud

You have to be proactive when it comes to credit card fraud. Scammers will always exist, but lucky you have a lot of technology on your side to help you stop them from stealing from your business.

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