Card-Not-Present Fraud

Definition

Card-not-present (CNP) fraud occurs when a payment card is used to make a purchase without the cardholder being physically present. This type of fraud typically takes place in online, phone, or mail transactions, where the merchant cannot verify the card’s authenticity in person. Because these transactions bypass chip or PIN verification, they are highly vulnerable to fraudulent activity.

Examples

Some common examples of CNP fraud include:

1. Online Shopping Fraud: Fraudsters use stolen card details to purchase goods or services from e-commerce websites.
2. Subscription Fraud: Criminals subscribe to ongoing services, such as streaming platforms or meal delivery services, using stolen card information.
3. Over-the-Phone Fraud: Fraudsters provide stolen card details over the phone to purchase high-value items.
4. Account Takeovers: When a fraudster gains access to a customer’s account on an online platform, they may save stolen card information and place unauthorized orders.

For a deeper look into fraudulent techniques, see Fraud.net’s article on types of online fraud.

Risks to Businesses

Card-not-present fraud poses severe risks for businesses, especially those operating online or taking payments via phone or mail. Key risks include:

• Financial Loss: Businesses are responsible for refunding customers in fraudulent transactions. These chargebacks come directly from the merchant’s revenue and can accumulate quickly.
• Reputation Damage: Repeated incidents of fraud negatively impact customer trust. Once consumers view a business as unsecure, they may take their money elsewhere.
• Operational Strain: Detecting and resolving fraudulent transactions diverts resources from more pressing business priorities.
• Higher Interchange Fees: To mitigate risk, payment processors often impose higher fees on CNP transactions, cutting into profits.

Learn how machine learning and AI tools can reduce these risks and shield your business in Fraud.net’s guide to fraud prevention technologies.

How Fraud.net Products Solve for Card-Not-Present Fraud

Fraud.net provides robust, AI-driven tools that empower businesses to identify and prevent card-not-present fraud in real time, reducing the financial and operational damage caused by these fraudulent activities.

Key features of Fraud.net's solutions include the following:

• Transaction Monitoring: Machine-learning algorithms analyze transactions in real time to detect anomalies and flag suspicious activity before payment is processed.
• Collaborative Intelligence Network: By tapping into a global network of fraud data, Fraud.net enables your business to compare transactions against millions of known fraudulent patterns.
• Identity Verification Tools: Fraud.net uses advanced identity checks, such as multi-factor authentication, IP analysis, and device fingerprinting, to confirm that the individual making the purchase is authorized to use the card.
• Chargeback Protection: Fraud.net integrates with your payment platforms to reduce chargeback rates and help safeguard your bottom line.

By implementing Fraud.net’s suite of products, businesses can build consumer trust, protect sensitive cardholder data, and create a safer transactional environment. Explore more about our Fraud Prevention Platform.