What is Card Not Present fraud? This is a kind of fraud that involves the unauthorized use of a debit or credit card details to perform a transaction in a non face-to-face setting. This unauthorised activities are usually done without the knowledge of the actual owner of the card. Today, majority of the CNP fraud occurs via the internet while a few occur via call centers operations and through mail. The fact that the merchant doesn’t have the opportunity to inspect the credit or card physically is the reason while it is named “card not present”.
Who bears the risk of loss when this fraud is committed? In general, when a fraud is committed with the physical card present the card issuing financial institution bears the loss and not the merchant. However, whenever a card not present fraud is committed, as far as the Card Associations rules are concerned. It is the merchant that bears the loss.
Who are those that commits these card not present frauds? Some of the CNP frauds that occur are committed by individuals but a very large percentage of these frauds are committed by criminal enterprises spanning national and international boundaries which possess very complex networks. They can infilterate legitimate corporations, accessing their database in order to obtain customer details and their credit card information. Once these details are obtained they can be used to commit CNP frauds at any point in time that they so desire.
How Do These Debit/Credit Cards Get Compromised? Contrary to the common believe that most credit cards get compromosed via website database hacking and other breakdowns, most criminals use a wide range of methods to get card details, ascertain that the card is not dormant and distribute the details to other members of their criminal organization. Such methods include phishing, skimming, and carding: Skimming involves the deliberate theft of credit/debit card detail by an employee of a legitimate merchant. In Phishing, on the other hand, the criminal presents themselves as a legitimate organization in an electronic communication, it is usually carried out using emails and the likes to direct unsuspecting users to provide their sensitive detail at a website which they would have created just for that purpose. Carding involves the processes that these criminals use to validate the details they have acquired from the unsuspecting users, this is usually done by supplying these acquired details that possesses a real-time transaction processing, once the cards becomes validated it gets forwarded to other members of their criminal setup.
What Other Version of CNP Frauds Are Present? To the best of my knowledge, one other version of CNP fraud that is present in our society today is known as the “Friendly Fraud”. In Friendly Fraud, The real owner of the card uses his very own credit card to perform a transaction and later disputes the receipt of the goods or services or denies ever making such transaction in the first place. This is a real problem in the digital products markets as its rate of success is phenomenal owing to the fact that merchants has no way of ascertaining whether the purchaser actually received the product or services. So most of the time, the cardholder ends up getting the product without paying a dime for it.
In conclusion, card not present fraud is a kind of fraud that has been very rampant in the digital market. These frauds are majorly perpetrated by criminal network organizations and a few individuals. In recent years, several steps are being taken to curb these ills especially in our digital markets and there are now lots of CNP fraud prevention innovations, many of these steps are already yielding good results. I am therefore of the opinion that the CNP fraud will soon be swept out of our digital market place.
References
Randall, S., 2010. $9 Here, 20 Cents There and a Credit-Card Lawsuit. New York Times. [online] Available at.<http://www.nytimes.com/2010/08/22/business/22digi.html?_r=2&src=me&ref=business&>
Accessed [05 November 2013]
McMillian, R., 2010. FTC Says Scammers Stole Millions, Using Virtual Companies. PCWorld. [online] Available at<http://www.pcworld.com/article/199952/ftc_says_scammers_stole_millions_using_virtual_companies.html> Accessed [05 November 2013]
Hoffmann, S., 2010. FTC Cracks Down On Micropayment Credit Card Scam. CRN. [online]. Available at <http://www.crn.com/news/security/225701708/ftc-cracks-down-on-micropayment-credit-card-scam.htm> Accessed [05 November 2013]
2012. Card Not Present Fraud; a simple primer. Accertify [online].
Available at http://www.accertify.com Accessed [05 November 2013]
Montague. D., 2013. 3 Techniques You Can Still Implement To Improve Fraud Detection This Holiday.The Fraud Practice LLC. [online]. Available at <http://fraudpractice.com/PressRelease-3ManualReviewFraudTechniques.html> Accessed [06 November 2013]
