Unfortunately, credit and debit card fraud runs rampant in CNP transactions as card-not-present (CNP) transaction occurs when neither the cardholder nor the credit and debit card is physically present at the time of the transaction.
Introduction:
Now a day’s people are more attracted towards the card not present transaction. Without going physically to any shop, people order through computer, mobile or telephone. Unfortunately, credit and debit card fraud runs rampant in CNP transactions. With the rapid expansion of Ecommerce platform, the percentage of card not present transactions are increasing vigorously. All the major population prefers these CNP transactions. Starting from buying vegetable to order food, cloth, new home appliances, in everything customer opts for this CNP transaction. So what is this card not present transaction? And why it is more prone to fraud? Let us discuss it in detail.
What is Card Not Present Transaction?
A card not present transaction(CNP,MO/TO, Mail Order/Telephone Order, MOTOEC ) is a payment card transaction made where the cardholder does not or cannot physically present the card for a merchant’s visual examination at that time order is placed and payment is affected. In simple words card-not-present (CNP) transaction occurs when neither the cardholder nor the credit and debit card is physically present at the time of the transaction. It’s most common for orders that happen remotely — over the phone or by fax, internet, or mail.
Different modes of card not present transaction:
Over-the-phone and mail order payments through virtual terminals
Card on file payments
Online shopping and “buy” buttons on websites
Manual card entry in a payment app
Recurring or subscription billing
Electronic invoicing
Mobile wallet payment through internet or within app
Credit and Debit Card Fraud :
Card not present transactions are a major route for credit and debit card fraud. Because, how do payment providers know whether the customer gave you the card details or by the fraud ones? Those details could have been stolen or obtained without the cardholder’s permission.
According to recent statistics published by the UK Finance, losses from fraudulent CNP transactions totaled £205.5 million in the first half of 2017, 19.7% up from just two years earlier. £154.5 million of this was from e-commerce, mail- and telephone orders. In the UK, card-not-present transactions represent 72% of the total credit and debit card fraud, and the number has been increasing over the past decade.
Ironically, these increases are observed in almost all countries that have introduced the highly secure chip & PIN technology EMV. Why? Presumably because chip and PIN makes it harder to defraud 'card-present transactions', but CNP transactions become an easier target.
Cyber Criminals play the merchant role to do fraud in CNP Transaction:
The United States Federal Trade Commission uncovered an operation running from 2006 to 2010 that netted more than $10 million in fraudulent charges on credit and debit cards. The perpetrators used more than 100 merchant accounts that they had created to do the billing.
Each merchant account was attached to an Employer Identification Number belonging to real merchant with a similar-sounding name. Each merchant account was tied to an 800-number from call me 800. Each account was also tied to a web site they had created.
A charge of $9 was processed on about one million credit cards over the four-year period.Each card was billed a single time. Credit card companies only investigate if the charge is more than $10, because it costs about that much to run an investigation.
Then the money was moved to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus, and Kyrgyzstan where the money could not be traced or recovered.They also rented physical addresses from companies which rent virtual office, such as formerly Regus, for each merchant account.
Complexity of CNP in Detection of Fraud:
Everyday complaints are getting lodge in police station that one person’s credit card is in its wallet but surprisingly the transaction happened in out of state or out of nation. Only the transaction message has come to him. Immediately customer reports his bank about the fraud and wait for the justice.
But it is very difficult to track CNP fraud whether really the transaction is initiated by customer or fraudster? Because it is unlikely the card present transaction where with the CCTV footage you can easily find out whether the customer has come to the merchant for shopping or any other person has come.
You can also go through the article to know more how bank hides in name of 3D secure pin in case of CNP transactions and making customer liable for the fraud in "Banks are hiding in name of '3D Secure Pin' and making customer liable for the fraud."
Conclusion:
Lastly if you prefer CNP transaction then you are more exposed to the victim of fraud transaction. So it becomes necessary for businesses to adopt online fraud solutions to protect both consumers and financial institutions. In parallel customers also should be aware on the cyber hacking, phishing, hoax etc. and be necessarily aware on how to protect themselves from being victim of the cyber frauds.
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