Implementing measures to help prevent CNP fraud and reduce online chargebacks protects an organization’s customers and bottom line. Companies that provide security and a positive experience are more likely to gain market share, keep their customers happy, and make the most of digital opportunities.
A chargeback is a payment reversal initiated by a card issuer to right the wrongs done by dishonest businesses or criminals. A turnaround can cost a company its revenue and reputation.
Know Your Customers
Card-not-present fraud is the digital version of pickpocketing, and it’s on the rise. For merchants, the result is lost revenue, sunk shipping costs, merchandise shortages, and hefty chargeback fees levied by their banks. Often, the people filing unwarranted CNP chargebacks are otherwise-legitimate customers who believe a chargeback and a refund are the same.
Friendly fraud can be difficult to combat because it’s often not caught in the transaction process, like other types of fraud or PCI compliance breaches. To avoid it, use clear transaction descriptions when capturing your products and services, and communicate any additional charges or fees with your customers. This can help prevent them from accidentally filing a chargeback due to confusion over a legitimate purchase.
Know Your Customers’ Devices
While it might seem counterintuitive, knowing your customers’ devices can help prevent CNP fraud. Criminals who perpetrate CNP fraud use devices like point-of-sale (POS) skimmers and hacking to obtain credit card information, which they then sell or use to buy items online.
These purchases are often incredibly low in value, and the right technology can detect unusual transaction patterns that flag them for fraud. This is why checkout processes that require multiple forms of identification—including email addresses, phone numbers, device fingerprints, and IP addresses—can help stop fraudulent CNP transactions.
These methods also help you stop chargebacks, which can occur when customers don’t recognize a charge on their bank statement or try to abuse company policies. Preventing friendly fraud can reduce your dispute volume by a significant margin and protect your reputation with consumers.
Know Your Customers’ Payment Methods
Card-not-present (CNP) fraud allows criminals to buy your products and services with stolen credit cards, resulting in costly chargebacks and negative customer experiences. You can prevent these scams by implementing the proper security measures.
To help prevent CNP fraud, e-commerce merchants should use checkout processes that allow them to verify their customers’ billing and shipping addresses. They should also use data enrichment tools to get an in-depth look at their customers’ email and phone numbers, device fingerprints, IP addresses, and transaction history.
Moreover, merchants should hang onto receipts, purchase orders, invoices, shipping confirmations, and other transaction records to support their case in a chargeback dispute. This will make it much more difficult for scammers to argue that they were not the actual owners of the products.
Know Your Customers’ Billing Addresses
As e-commerce and global payments grow in popularity, criminals are using new technological advancements to commit card-not-present fraud. This fraudulent transaction allows criminals to use stolen credit cards without the cardholder or physical purchase being present.
Knowing your customers’ billing addresses can be an effective defense against CNP chargebacks. This information can help you detect suspicious transactions and quickly identify fraudulent activity. It’s also a good idea to require that customers provide their address when completing a CNP transaction, as this can serve as a robust verification tool against illegitimate claims of product dissatisfaction or buyer’s remorse.
Other measures to prevent chargebacks include requiring customers to provide different types of identification when ordering online or over the phone and collecting signed delivery receipts or courier tracking documentation if you sell physical goods. Enrolling your staff in ongoing training on the best practices of customer service and dispute management is another way to keep chargeback fraud to a minimum.
Know Your Customers’ IP Addresses
To make any connection on the internet, a device needs to have an IP address. This means everything from laptops and tablets to smart thermostats, cell phones on a wireless network, and even children’s toys has an IP address.
These are used to identify a device’s location and connect it with the right networks. They also give websites the ability to customize content based on a customer’s country or language, and they can help streaming platforms decide what kind of content a user should be able to access.
An IP address can also help identify potential fraud indicators, like multiple login attempts from different devices or increased password reminders and resets. This information can be crucial in defending against a CNP chargeback.