Card Not Present Fraud
Card-not-present fraud refers to deceptive activities associated with credit card transactions where the physical card is not required for payment. Credit card payment processors implement various measures to reduce the risk of such fraud. These measures encompass verifying that the customer’s provided address matches the billing address on record with the credit card company, validating the authenticity of the three-digit CVV security codes, and prohibiting merchants from retaining these codes.
However, if a criminal manages to pilfer these details, it can make the fraudulent transaction appear legitimate.
Card-not-present fraud can ensue when a wrongdoer gains access to a cardholder’s name, billing address, account number, three-digit CVV security code, or card expiration date. These critical details can be illicitly acquired electronically without the need for the physical card.
Theft of credit card data for use in card-not-present fraud typically transpires via online phishing schemes or through the unethical actions of employees who steal a customer’s credit card information. In rarer cases, it may result from breaches of merchant databases.
When card-not-present fraud occurs, it is the merchant who incurs the financial loss. This type of fraud can have a substantial impact on a merchant’s financial health, especially in the retail sector, where profit margins are often slim.
In contrast, card-present fraud typically shifts the financial responsibility to the credit card issuer rather than the merchant. According to credit card terms and conditions, cardholders are generally not held accountable for any fraudulent charges, whether they arise from card-present or card-not-present fraud.
Written by Andrii Vovk