What is Card-Not-Present (CNP) Fraud?
The card-not-present fraud is a type of credit card scam wherein an unauthorized user is able to make payments using a credit card without physical presentation of the card to the merchant. CNP is most common in transactions that are made over the phone or online.
For a CNP fraudulent transaction to occur, the scammer uses stolen information to make the transaction appear legitimate. These pieces of information include the cardholder’s name, address, security codes, and the answers to security questions and are typically acquired through online phishing, through theft of a business’s credit information through a database, or through database hacks. With all the information in hand, the scammer then places an order for the product or service via channels used by the merchant (email, fax, phone, or website). The merchant, unable to physically examine the credit card used, validates the identity of the caller through the information provided. Upon verification, the merchant processes the payment on the stolen credit cards/information and delivers the product or service.
Although the credit card holder’s information was stolen, it is the merchant that carries the burden for the fraudulent sale. As the real cardholder disputes the unauthorized charges made, the merchant receives a chargeback and is held responsible for paying back the amount charged on the stolen credit card. However, having fraudulent transactions made on stolen credit cards can be a burden and can be time-consuming.
How to Protect Yourself from CNP Fraud
Because occurrences involving CNP fraud is increasing, credit card holders and merchants should always look out for signs that a fraudulent transaction has occurred, or about to occur. Here are some common signs concerning CNP fraud:
- Larger than normal orders for multiple times for items with high resale value.
- Order patterns different from regular behavior for repeat customers.
- Requests for rush delivery.
- Use of single card with multiple shipping addresses, or the use of multiple credit cards for one order.
- Requests for extra funds to be sent to a third party shipper.
- Orders made using different names, addresses, and card numbers from a single IP address.
- Purchaser name and card holder name are different.
In order for merchants to protect their businesses, always look out for the common signs of fraud when transactions are made. For credit card holders, contact your financial institution or credit card provider for implemented measures concerning CNP fraud. Ask them if they have credit card controls or other security measures.