Reports show that online fraud has increased over the past year from 9 to 12% in 2016. This goes to show that card not present fraud still poses a great threat to merchants in 2017 as well. The EMV fraud chargeback liability has been able to reduce the number of card present payment fraud cases but it does not protect against scenarios of card not present fraud. Since this fraud cases affect merchants of all sizes, we will take a closer look on the fraud cases and measures that business owners can take to prevent from falling victims to fraudsters.
Card Not Present Fraud Examples
- Online skimming: Online skimming occurs when hackers look for weaknesses in a point of sale (POS) system and they use malware to gain access to data which they steal and then sell the information for fraudulent purposes.
- Intercepting packages: These cases include thieves purchasing items using stolen card information and then they intercept these packages. This is a common case of card not present fraud and so many businesses and consumers alike have fallen victims.
- Gift card fraud: Individuals who have obtained goods illegally and looking to turn these products into quick cash often use stolen payment details to activate gift cards. They then sell the digitally delivered funds immediately to an open market place.
- “Testing” cards: Fraudsters usually make small purchases using credit card numbers to test whether the transactions will go through. Once they are satisfied that the numbers work, they now make large purchases. The testing purchases are usually small enough to go unnoticed by most credit card bearers.
How To Combat Card Not Present Fraud
One of the measures that merchants can take to combat online fraud is by implementing the request card security codes and address verification service (AVS) as a payment solution. These features are located at the back of payment cards and they help to verify that the cardholder is genuine. Both these payment solutions can help to combat card testing by detecting and slowing down transactions which discourages fraudsters. Card testing can also be combated by identifying the consumer’s device IP geolocation velocity and IP address to monitor for any irregular purchase activity.
To combat intercepting packages fraud, merchants should make sure that they contact card holders via calls or email to confirm on the purchases. They should request shipping and billing addresses from clients before releasing any packages and compare to the addresses in their systems. If the billing address is different, they should follow up to confirm whether this is correct or the item is a gift to someone else.
Online skimming can be combated by merchants ensuring that passwords, security updates and software patches are in order to bolster security and prevent any holes that fraudsters can take advantage of to get sensitive information.
Gift card frauds can be prevented by merchants updating their order review processes. They can use real time fraud scoring to identify devices for certain transactions and only approve the transaction process when they identify an IP with reputational scores.
Merchants can invest in these proven security solutions to ensure they protect themselves and their clients from card not present fraud cases.