Card Not Present Fraud Burdens eTailers

Saturday, May 21, 2011

Robert Siciliano

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More than 90% of online purchases are made with cards, whether they are credit, debit, or gift cards.

A virtual payment that takes place online or over the phone, without physical inspection of the card, is considered a “card not present” or CNP transaction.

In a CNP transaction, it is not possible to examine a card’s security features or signature. This creates a higher degree of risk than when a card is physically present at the point of sale.

As a result, merchants pay higher fees for CNP transactions, and they pass those costs on to the customer.

Identity thieves can use stolen credit card data to make CNP purchases, or they can copy the data to blank cards, which they can use at self-checkouts or when the thief knows the salesperson, who can “sweetheart” the transaction.

Blank cards can also be pressed with foils to create the appearance of a legitimate credit card.

Device reputation, an effective online fraud prevention method, helps protect retailers from fraudulent CNP transactions by examining the computer or other device for a history of unwanted behavior plus any suspicious activity at the time of transaction.

If a customer’s PC, smartphone, or tablet indicates an abnormally high level of risk, the merchant can reject the purchase in advance.

iovation, the global leader in device reputation, has blocked 35 million fraudulent online transactions in the last year. Protect yourself from credit card fraud by checking your statements regularly.

As long as you dispute unauthorized credit card charges within 60 days, federal laws limit liability to $50.

Unauthorized debit card charges must be reported within two days, or liability jumps to $500.

Robert Siciliano, personal security and identity theft expert contributor to iovation, discusses credit and debit card fraud on CNBC. (Disclosures)

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