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CNP Fraud: Top 3 things eCommerce Merchants Need to Know

Card Not Present (CNP) Fraud is growing in the US and eCommerce merchants need to find ways to secure their business and consumers

Since the introduction of EMV chip cards in the US, counterfeit activities have decreased by 76%. While this is good news for traditional brick-and-mortar retailers, eCommerce merchants are seeing CNP (card not present) fraud on the rise as fraudsters find sophisticated ways to steal consumer data. According to Jupiter Research, CNP fraud will cost merchants up to $70 billion globally until 2022.  Still, merchants find fraud prevention measures too costly or complex to navigate. To help eCommerce merchants understand the effects of CNP fraud, here are 3 things they need to know about this growing trend and valuable tools that can help protect their business.  

1.  Merchants can be held liable for fraudulent transactions

CNP payment transactions, by their nature, are performed “behind the screen” with no person present. As such, the burden of proof lies on the merchant. He or she is liable for fraudulent transactions and will need to issue a refund and any associated costs to that transaction (shipping, restocking fees, etc.). They are also liable to their acquiring bank that may assess a chargeback fee for the transaction. If the occurrence of chargeback transactions increases, bank cards can begin raising fees sharply, flag their account as high-risk and even step in by shutting down the merchant account. Merchants can prevent these measures by investing in security and fraud tools that track and assess every transaction.  GlobalOnePay offers several tools to help merchants defend themselves. First is Sentinel Defend, a monitoring tool that tracks consumer activity across multiple screens (desktop, laptop, mobile) and assigns risk scores for every payment transaction to determine the likelihood of fraud. Additionally, B2B merchants can add on Level II processing which collects secure detailed payment information that is given to bank card providers in exchange for reduced card fees. These tools are just some of the ways merchants can save time, money and resources to combat fraudulent activities.

When CNP fraud occurs, it is the merchant that is liable for all costs associated. If the occurrence of CNP fraud increases, bank cards can raise fees, flag their account as high-risk or take measures to close the merchant account entirely.

2.  Identity theft creates a chain reaction that impacts consumers, corporations and eCommerce retailers

In 2017, major breaches from large corporations such as Sears, Best Buy and Delta Airlines were reported. These breaches were just the beginning of a long chain reaction that costs consumers, corporations and online retailers over $16.8 billion in losses.

When a breach occurs at the corporate level, the consumer data is often shared on the dark web. Last year, over 1.4 billion cardholder information from around the world was found in these digital dens. For corporations, large security breaches not only mean being liable for heavy fines and penalties, but impacts brand reputation as consumers lose trust in giving up their card info to make a purchase.

For consumers, these breaches lead to an ‘Account Takeover’ where fraudsters use stolen data to make a purchase. According to Javelin Strategy & Research, last year identity fraud hit an all-time-high with 16.7 million US victims. Many of these purchases were made online where fraudsters use multiple devices, that are hard to track and do not require the cardholder to be present. As mentioned previously, eCommerce merchants who accept CNP transactions are held liable if the transaction is fraudulent and are responsible for all costs.

How can eCommerce merchants break this chain and defend themselves from this rising trend? One is by using GlobalOnePay’s Sentinel Defend, a premier fraud tool that helps prevent account take overs by scoring the risk of every transaction to determine the legitimacy of the charge. If the risk score falls between -1 to -100, the merchant can take proper measures to ensure the order is not fulfilled.

3. Fraud prevention and security for ANY sized business must take multiple approaches

In the age of the digital consumer, merchants are finding it harder than ever to tell the difference between a legitimate chargeback, which is called friendly fraud, and one that is not. Fraudsters have become more sophisticated in their approach by committing these crimes on multiple screens (desktop, laptop, mobile) using techniques such as IP spoofing, which is very difficult to track. They also use methods such as collecting consumer credit card data by hacking large corporate servers or paying for them on the dark web. This data is then used to make fraudulent purchases online in what is known as Account Takeover or ATO.

Automated tools, expert analysis and constant monitoring is some of the ways that a business can help protect their customers from fraudsters.

Last year, ATO resulted in $5.1 billion in losses, along with 16 hours of time merchants spent trying to resolve these issues with consumers and banks. With the amount of ways merchants can become victims of CNP fraud, they need to take a multi-prong approach in their security and fraud protection that combines automated tools and manual processes. Which is why GlobalOnePay developed Sentinel Digital Fortress (Sentinel DF), a customizable risk and security program. Sentinel DF offers automated tools such as Sentinel Defend which monitors activity across multiple screens and assigns a risk score for every payment transaction to determine the likelihood of fraud. Merchants can choose between the self-managed option or have GlobalOnePay’s Risk Team manage all flagged activities. Merchants can also receive full-service support from an experienced team of Risk Experts that can fully analyze their site, all payment transactions and assist with chargeback resolutions.

CNP fraud is always changing as criminals use new tools and techniques to access consumer and business data. GlobalOnePay helps eCommerce merchants stay ahead by following trends and investing in new tools to help clients fight back against fraud. Learn more about our security and fraud protection tools today by contacting our team.

Contributor:

Shallana Edwards

Shallana is currently the eMarketing Brand Manager for GlobalOnePay, a division of Pivotal Payments Inc. As an experienced marketer and writer, she wants to help eCommerce merchants navigate the complexity of the payments industry with simple tips, best practices and informative articles designed to help them grow domestically and internationally.