The Pending Consequences of CNP Fraud

The Pending Consequences of CNP Fraud

It is well known that CNP fraud (card not present fraud) is escalating and will continue to do so. It is going to change the way consumers in the U.S. shop online.

The seminar Beyond Fraud: The Unintended Consequences of CNP Fraud at the 2016 CNP Expo, addressed several ways in which shopping on the internet will change, and the byproducts of these changes.

The panel in Beyond Fraud included moderator Julie Conroy, of Aite Group; Jim Houlihan of the Paladin Group; Jamon Whitehead of Backcountry.com; and Jacob Bennett of the National Merchants Association.

And there were some powerful predictions and statements:

“Fraud doesn’t go away,” one of the panelists said. “It goes somewhere else. In the next year or two, we’re going to see an all-out assault.”

“The next few months are going to be very telling for SME merchants who are lagging behind,” said another.

The (Unintended) Consequences

  1. Rise in Declines: Shopping online could get frustrating. With the increase of CNP fraud, merchants are understandably going to be more defensive. One of the after-effects, however, will be an increase in card declines. Additionally, a byproduct of declines is false declines, where the merchant has reason to believe the cardholder making the online purchase is fraudulent, but is perfectly legitimate.
  2. Surge in Account Updater Programs: Each of the credit card brands offer account updater services in which they automatically update your subscriptions with your new credit card information (name, 16-digit number, MCC code) in the event your credit card information is lost, stolen or replaced.
  3. Opting for 3D Secure: 3D secure continues to be the best defense against CNP fraud. What used to be a disruption in the checkout process, is now a much more seamless experience.

Is There Any Good News About CNP Fraud?

Other than job security for fraud mitigation companies there are several positives that consumers and merchants have going for them:

  • Canada and the U.K.: Between 2001-10, both Canada and the UK suffered through a spell of rampant online fraud when each nation migrated to EMV chip-enabled credit cards. That said, U.S. has two models to look upon.
  • Technology is More Advanced: 3D secure. Better authentication tools. Advances in biometrics. P2P encryption and tokenization. The U.S. is better equipped to deal with internet fraud than Canada was in 2008 and the U.K. earlier that decade.
  • Awareness: Many e-commerce merchants and consumers are much more aware of fraud than they were two years ago, when the Targets and Home Depots were breached. Many are acting on this awareness when before, fraud was considered the cost of doing business.
  • More Consumer Data: The wealth of consumer data that the card brands store and analyze is more extensive than ever. The card brands track consumer buying habits such as spending amounts, IP addresses and time of the purchase among other criteria.

We’re anxious to know what your e-commerce business doing to fight CNP fraud. Please leave us a comment below.

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