What Merchants need to Know About Card-Not-Present Fraud

What Merchants need to Know About Card-Not-Present Fraud

Online commerce allows merchants to market their goods to a whole new set of customers. A well-managed online business has the potential to pull in serious revenue. A drawback to the rise of eCommerce is the proliferation of card-not-present (CNP) fraud. This type of credit card fraud occurs online or over the phone, with no physical card involved. Scammers have several ways to commit this crime, but there are ways for merchants to fight back.

Friendly Fraud

Friendly fraud, also called chargeback fraud, occurs when customers make legitimate online purchases then falsely dispute the transactions with their card issuers. Perpetrators frequently claim they are dissatisfied with the product or that it never arrived. This is considered a form of online shoplifting because it allows consumers to obtain goods without paying for them. It is difficult to track fraudulent chargebacks, which makes these cases hard to resolve.

Internal Credit Card Theft

Merchants seek honest and dependable staff, but, unfortunately, bad actors can still slip through. Misuse of electronic credit information by company employees is a main contributor to CNP fraud. This can be especially damaging to merchants because it erodes the trust between the companies and their customers. Businesses can protect themselves by running background checks on potential hires and by thoroughly checking references.


This is a common email scam in which criminals send fake emails to their victims, claiming to be a bank, utility company, or retailer. These emails often ask customers to click on links that facilitate hacking, or to enter personally identifiable information online. Most businesses do not request social security numbers or credit card information through email. If this is the case for your business, it is wise to make your customers aware of this policy.

Database Hacking

While this avenue is less common, it is still a potential source of CNP fraud. Tech-savvy criminals hack into merchant databases to steal credit card numbers, along with all other information required to make purchases. They may sell the information or use it for their own benefit. This type of fraud has the potential to impact large numbers of customers, severely impacting a businesses’s reputation and bottom line.

Protecting Yourself

As CNP fraud grows more sophisticated, merchants need even more advanced resources to fight back. Companies like Ethoca offer various solutions to help card issuers and merchants fight credit card fraud. With their support, business owners can reduce fraudulent chargebacks, protect sensitive customer information, and build healthy customer relationships.