Why online retailers are vulnerable to credit card fraud
E-commerce grew more than 44 percent between Q2 2019 and Q2 2020, according to the US Census Bureau. Thanks to this rapid growth in e-commerce and CNP transactions, online retailers are increasingly vulnerable to credit card fraud.
While the adoption of smart cards has strengthened security for physical, in-store transactions, criminals are now targeting online retailers more often because they allow for CNP transactions. In fact, according to a 2018 study by Javelin Strategy & Research, CNP fraud is now 81 percent more likely than card-present fraud.
Fraudulent CNP transactions can be difficult to detect in an online environment. Criminals can make purchases so quickly that most consumers won’t notice their account has been breached until they’ve incurred unauthorized charges on a fraudulent purchase.
In many cases, criminals will test card information on multiple retail sites, determine why it was declined, and then use process of elimination to track down any additional information they may need. They can also use virtual private networks (VPNs) to hide their location.
Online retailers are also vulnerable to friendly fraud. That’s because card networks like Mastercard and Visa have “zero-liability policies,” so consumers usually don’t have to pay when they’re victimized. As a result, criminals (or unscrupulous consumers) can make a purchase then dispute the charges, claiming they never received the item or didn’t place the order.