For a variety of reasons, card not present (CNP) transactions are on the rise. This is especially true in the eCommerce space, where fraudulent activities can have a significant impact on businesses.
But what are CNP transactions, and why do they matter? In this article, we'll explore those questions and explain why you should strongly consider implementing CNP fraud protection for your business.
A card not present transaction occurs when the payment card used to complete a purchase is not physically presented to the merchant by the customer. This includes transactions with virtual terminals, websites that allow customers to check out without requiring a physical terminal, and even telephone and mail orders.
In most cases, card not present transactions are completed using a credit or debit card. However, other payment methods such as PayPal can also be used for CNP transactions.
There are a number of reasons why businesses should take CNP fraud protection seriously. Here are some of the most important ones:
At this point, it's no secret that CNP transactions are on the rise. In fact, a recent study by The Nilson Report found that CNP payments accounted for more than 60% of all card payments in 2016. That represented a very significant increase from the total in 2009, when they accounted for slightly more than 50% of all transactions.
As is often the case with payment card fraud, CNP transactions typically represent an easier target for criminals. That's because many consumers tend to use their credit cards online and via mobile transactions anyway – making it easier for scammers to use stolen credit card information on these unsecure transactions.
This is especially true on mobile devices, which are notoriously vulnerable to fraud. And while EMV chips have certainly helped reduce in-store fraud, the problem of CNP fraud has taken its place. That's because many online retailers still do not support EMV. Some don't want to pay the additional fees, while others haven't adapted their systems for it.
Although many types of fraud can be identified with technology that's available today, CNP transactions represent a much more challenging undertaking. For one thing, there are simply far more of them. This makes it more difficult to spot suspicious payments, as there are so many transactions that must be monitored and analyzed.
In addition, some types of CNP fraud can be nearly impossible to identify with existing technologies. For example, virtual payments from hacked accounts cannot easily be identified by traditional technology – especially if the account holder data has been compromised.
This is why it's so important for businesses to employ CNP fraud protection systems that can help identify these types of fraudulent payments.
As we mentioned earlier, card not present fraud can have a significant impact on businesses. In fact, according to a study by Visa, CNP fraud accounts for almost 60% of all payment card fraud – and it has a direct impact on businesses:
"If each affected business absorbs $2,500 per incident and there are 1 million small to midsize merchants with average sales of $1.5 million, the total loss is about $3 billion."
As you can see, the impact of CNP fraud is real. For this reason, it's important to take action against this type of fraud so that your business doesn't suffer any long-term consequences.
Another reason that businesses should be concerned with CNP fraud is that it can have a real impact on customers. For one thing, customers may feel less secure knowing that their credit card information is being used online – even if they trust the retailer with their data.
In addition, many customers prefer to make payments with a credit card because of the added protection it provides. If a business doesn't have safeguards in place to protect customers from CNP fraud, they may start to lose business to competitors.
Finally, it's important to note that the cost of CNP fraud is rising. In fact, according to a study by Juniper Research, the global cost of CNP fraud is expected to reach $19 billion by 2020. That's up from the $15 billion that was reported in 2016.
This rise in cost can be attributed to a number of factors, including the increase in CNP transactions and the increasing sophistication of cybercriminals. For businesses, this means that it's more important than ever to have a solid CNP fraud protection plan in place.
