Retailer wins battle against online payment fraud

Tags: Online Retailing, Payments, Security
Type: Case Study
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In 2008, retail losses due to online credit card fraud reached a record $4 billion in the U.S. and Canada, according to CyberSource Corp. It’s a staggering number that’s been rising by double-digit percentages annually as the web continues to be a fast-growing channel for retailers.

Merchants that accept purchases via the Internet or telephone face a unique challenge known in the industry as “card-not-present” or CNP fraud. This term refers to all credit card transactions made from a remote location. There is no credit card or customer signature physically present for the retailer’s inspection. These transactions are riskier than in-store transactions in which the customer hands the credit card to the merchant as a Point-of-Sale terminal.

Fraud is more common in CNP purchases because of the anonymous nature of the transaction. The industry losses are significant because the merchant bears the full, financial responsibility for this type of fraud, including the value of the merchandise and penalties charged by card companies and card-issuing banks.