Last editedJan 20212 min read
Credit card fraud is a complex process to detect whether the cardholder is present or for a case of card not present fraud. It is an easier process when it is a face-to-face transaction since it will be possible to do all the verification. The challenge comes in when it is an online transaction.
What is Card-Not-Present Fraud?
Cnp fraud is a credit card scam, where the customer is not physically present during the fraudulent transaction. These types of transactions mostly happen through mobile payments or online. That is the reason they are hard to detect and prevent, unlike card-present fraud. With the latter, the merchant can examine the credit card for possible signs of fraud, such as altered account number or missing hologram.
How to Understand Card-Not-Present Fraud
Most of the credit card payment processors work to ensure that they minimize any card-not-present fraud. Some of the preferred procedures include:
You need to verify the address given by the customers when making the purchase.
It is crucial to match the billing address on file with one given by the credit card company.
To prevent any cnp fraud, you need to check the validity of the three-digit CVV used as security codes. Educate the customers that they should not store the codes.
The challenge is when the fraudster has real information; cnp fraud prevention will be impossible.
How is the Credit Card Information Obtained?
The main problem with card not present fraud is that most victims are not aware of the fraudulent transactions. Unlike the physical credit card, for cnp fraud, they only need the card information. The victim will have their physical card, yet they do not recognize they have lost their money.
There are different techniques that criminals use to get payment card information. The most common ways to obtain the information is through skimming, hacking, and phishing.
Hacking: It happens by attacking computer systems to get financial information. It can be from banks, hotels, retailers, or service providers. The data is sold to other criminals to carry out other financial crimes.
Skimming: The process involves stealing information from the physical card. The criminals will use card readers, especially in public places such as ATMs.
Phishing: It happens when a fraudster tries to get financial information from the customer by posing as a legitimate credit card company. They will send emails that accounts have been tampered with, and they need your information to rectify the problem. The scammers will provide a link to a fake site and steal their login information. They can use the information to get new cards and open new accounts.
Approaches used for Card not Present Fraud Prevention
When you compare it with the other types of fraud, the main challenge with cnp fraud is that the power to stop the transaction is dependent on the card issuers and merchants.
The recommended cnp fraud prevention will be to upgrade authentication tools and deal with legitimate owners or agents.
There are two ways to do multi factor authentication. First is ensuring the customer receives a code on the verified phone number or email or biometric scanning for identification.
Tokenization helps by generating a temporary digital identifier or token. It helps by avoiding the issuance of account numbers.
The merchants should look for reliable payment options that will offer customers the protection they need. They should adapt to the use of CVV numbers for card not present fraud prevention.
Financial transactions need to be validated and verified for consumer protection against any loss. Find more about GoCardless automated payment system and how they can help you with adhoc payments or recurring payments.