White Paper: Issuers Waking up to CNP Fraud

April 24, 2014

3D Secure programs, EMV implementation and increasing consumer comfort transacting online are opening the eyes of credit-card issuers to the burgeoning problem of card-not-present fraud, according to a new white paper from Des Moines, Iowa-based processor The Members Group. While nearly every e-commerce merchant has been dealing with fraud since its first transaction, financial institutions have been able to “shrug their shoulders when it came to CNP Fraud,” the authors wrote. But not any more.

Merchants might be surprised to hear “CNP chargebacks have been virtually wiped out,” but, while it may have been hyperbolic, the authors’ point was that growing adoption of 3D Secure could threaten issuers’ ability to charge back fraudulent purchases. With more at stake, the paper said, it is time for the networks to “develop strategies that allow the protocol to offer merchant and issuers ‘equal rights’.

”Additionally, issuing banks must invest in better antifraud strategies in anticipation of the coming storm of CNP Fraud , and should also fall back on a low-tech answer merchants have been using for years: manual review.

“The most important change an issuer can make is to hone its fraud-detection strategies to identify and prioritize accounts where a transaction has been declined by a 3D Secure module,” the authors concluded. “Those accounts should be queued for review by a human fraud analyst.”