Understanding CNP Fraud: Prevention and Solutions

March 14, 2024
Understanding CNP Fraud: Prevention and Solutions

Card not present fraud (CNP fraud) is one of the most prevalent issues facing the digital payment landscape. CNP fraud transactions feature criminals posing as payment card owners and entering the card’s information for purchases not authorized by the account holder.

These fraudulent transactions can be costly for businesses and individuals targeted by the scheme. That’s why it’s imperative to implement robust and flexible fraud prevention to mitigate the harm they can cause.

What is CNP fraud?

CNP fraud is a fraudulent “card not present” transaction. In most cases, this kind of credit card fraud involves an over-the-phone or virtual transaction in which a physical card is unnecessary—i.e., it’s not being scanned—but its relevant information is being relayed for payment.

Common types of CNP fraud and online payment fraud include:

  • Physical cards being stolen or accessed through identity theft
  • Phishing for credentials (i.e., personal identification numbers)
  • False declines, in which CNP prevention systems misfire

There are, of course, many CNP transactions that are not fraudulent, such as when an authorized user provides their own card information.

Conversely, there are also many instances of card-present fraud, like when a criminal scans a counterfeit card—or one that is real but does not belong to them and which they’re not authorized to use.

How CNP fraud works

A typical CNP fraud scheme begins with attackers acquiring the means to use a credit card. This may mean stealing the physical card itself. Or in many cases, cybercriminals simply retrieve the cardholder’s name and the card number, expiration date, and card verification value (CVV).

Then, once attackers have the card info, they use it for a purchase.

For example, cybercriminals may harvest hundreds or thousands of users’ credit card information. Then, they may make small purchases sporadically with only a select subset of them to evade detection.

Vulnerabilities leading to CNP fraud include permeable firewalls and weak or outdated access control protections. Cybercriminals who get their hands on individuals’ account information through targeted social engineering campaigns can use it to launch further fraud.

The impacts of CNP fraud

For businesses, CNP fraud means threats of lost profits from fraudulent sales being refunded or lost outright. Experian estimates that false declines alone can cost businesses up to $11B annually.

The immediate harm of costly fraudulent purchases in their names is just the start for consumers. Long-term impacts of identity theft include other insidious consequences like their home or billing addresses being leveraged for robbery, extortion, or other crimes.

For these reasons, minimizing payment fraud risks and ensuring secure online transactions will only grow more important over time. To combat this issue, businesses are turning to innovative solutions like Microblink. 

Microblink is a cutting-edge technology that uses advanced machine learning algorithms to verify the authenticity of important documents, including ID cards, passports, and driver’s licenses. See how businesses combat CNP fraud with Microblink.

The growing threat of CNP fraud

Per one expert projection, CNP fraud comprised 73% of all card payment fraud in 2023, amounting to $9.49B in business losses.

eCommerce fraud affects all sectors, with outsized impacts on businesses that operate primarily or exclusively online. If present fraud trends continue, we can expect further increases in CNP and related schemes in the future across virtually all market segments.

Still, one expert cybersecurity firm has speculated that, despite CNP fraud’s challenges and potential impacts, CNP is the future of payments. The ways it maximizes accessibility and minimizes friction across eCommerce and all online purchases simply cannot be beaten.

Best practices for CNP prevention

Organizations that process credit card payments—and those that process card information—need to take proactive measures to prevent CNP fraud. To that effect, strategies for CNP fraud prevention include:

  • Authenticating card users and information across transactions
  • Training employees on how and why to report suspected fraud
  • Educating consumers to maximize vigilance against theft

Arguably, the most important consideration is ensuring fraudulent CNP transactions are identified and addressed as swiftly as possible. You can find more insights on preventing payment fraud here. 

Identifying and detecting CNP fraud

Stopping CNP fraud starts with detecting it, which requires knowing what to look for. Common indicators of CNP fraud include irregularities in shipping or billing addresses and unusually large (or small) orders.

In addition, identity- or behavior-related inconsistencies, like changes in contact information, IP addresses, requests, or communication flows, might mean a purchase is fraudulent rather than legitimate.

The best way to scan for, identify, and act on indicators like these is to automate monitoring and verification processes with AI-driven tools.

Explore Microblink’s fraud prevention solutions.

Top solutions for preventing CNP fraud

Identity verification solutions, like Microblink, are some of the most effective digital payment security and fraud prevention methods.

Our BlinkCard leverages the power of AI to enable swift, secure payments and reduce CNP fraud by up to 95%. Our Screen Detection, Photocopy Detection, and Hand Detection technologies are designed to sniff out even the most advanced forms of CNP fraud to keep your business—its personnel, clientele, and all other stakeholders—safe.

To learn more, get in touch today!

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