In a previous blog post we mentioned how the switch to EMV in Europe actually resulted in an increase in Card-Not-Present (CNP) fraud. While the current switch to EMV in the US is certainly part of the reason for this increase, there are other factors that have contributed to the spike in CNP fraud.
The simplest factor behind the increase in CNP fraud is the increase in CNP transactions. The explosive growth of E-Commerce over the past decade means that more transactions than ever are being performed in a CNP environment.
The rising popularity of E-Gift Cards is another reason. While it is possible for traditional (physical) gift cards to be purchased fraudulently, physical gift cards require delivery to a physical location which is inherently traceable. E-Gift Cards do not require a (real) physical address, which removes a significant barrier for fraudsters, and allows for fraudulent transactions internationally.
The increased use of in-store pickup has also contributed. Unlike the other factors mentioned, in-store pickup has contributed to CNP fraud due to retailer practices vs. inherent attributes. The majority of retailers do not require consumers to rerun or present the card at time of pickup, and many only require the e-mailed order receipt.
These factors will likely continue to contribute to even higher levels of CNP fraud. E-commerce is expected to continue steady growth for years to come, and consumers will continue to push retailers toward offering greater convenience. Retailers will need a layered fraud prevention approach to address increasing attempts of CNP fraud, or will need to absorb the costs of that fraud.