What Is the Meaning of CNP Fraud? Here’s How to Protect Your Business from Criminals

Card-not-present (CNP) transactions are convenient for remote customers.

But without proper security measures, these purchases are vulnerable to fraudulent activity.

It’s crucial for merchants to understand the meaning of CNP fraud and how to prevent it.  

Online shopping. Mobile apps. Auto-renewals.

Say hello to card-not-present (CNP) transactions.

For business owners like yourself, they’re a major route of profit, especially as e-commerce continues to grow.

But there’s a catch.

If you’re not careful, CNP transactions will open up the door to fraud.


Here’s the lowdown on CNP.

First, let’s look at the meaning of CNP and how it works.

A CNP transaction takes place when the merchant doesn’t physically see or hold the customer’s credit or debit card.

Because it never touches a machine, nothing is tapped, swiped, or inserted.

Types of CNP transactions include Internet, phone, and mail order purchases.

Think subscriptions, automatic “buy” buttons, and mobile wallet apps like Apple Pay.

CNP payments are convenient for customers.

With a single click, they can place an order.

Plus, CNP payments make it easier for you to reach more people, whether they are in the next town over or across the country.

It’s a win-win situation, right?

Well, that depends on your preparation.


CNP fraud is on the rise and shows no sign of slowing down.

Because CNP payments don’t need a physically present card, they’re the ideal scenario for fraudulent charges.

In fact, a 2014 study by Aite discovered that 45% of total card fraud is caused by CNP fraud.

The independent research and advisory firm also shared that online and mobile commerce is rising at least 15% each year.

As that number increases, so will your risk.


How does CNP pave the way for fraud?

For criminals, CNP transactions are a dream come true.

With so much space between the merchant and credit card, there’s ample room for sketchy business.

Here are two ways CNP fraud can show up:

  • Credit card fraud happens when someone makes a purchase with a card or card number that doesn’t belong to them.
    In the case of CNP, the card number is a fraudster’s golden ticket.
    After all, without physical interaction, a thief doesn’t necessarily need the actual card.
    Merchants also can’t ask for photo ID.
    Eventually, the real cardholder will catch on and file chargebacks against you.
    It’s a headache for everyone.


  • Chargeback fraud, or friendly fraud, is a false chargeback claim filed by the cardholder who made the purchase.
    Maybe the order “never arrived” or the charge “looks unfamiliar.” In CNP transactions, this is harder to prove.
    (On the other hand, if the card was present, the merchant witnesses the cardholder swiping the card and receiving the goods.) Ultimately, chargeback fraud exploits the very meaning of CNP: lack of contact.
    It also takes advantage of the chargeback process, resulting in merchant fees and profit loss.
    If you’re not prepared, CNP transactions will be your biggest nightmare.


Prevention and protection is a multi-layered approach.

It’s a lot to handle, but don’t lose hope just yet.

By “layering” the right security measures, you can fight CNP fraud from multiple angles.

These include:

  1. Card Security Code
    This 3 or 4-digit number verifies that the customer has the physical card.
    For the bad guys, it may be the missing piece that foils their plan.
  2. Phone Verification
    To verify a customer’s identity, text or call with a confirmation code.
    It’s a hurdle for both thieves and friendly fraudsters.
  3. Address Verification
    The billing address doubles as CNP fraud prevention.
    With an address verification service, you can check if their billing address matches the one that the card issuer has on file.
  1. PCI Compliance
    Aside from improving customer confidence, meeting PCI compliant standards will keep protective measures in place.
    It also ensures that CNP transactions are securely processed.
  2. Order Monitoring
    Thieves work fast.
    Their goal is to place multiple large orders—often with rapid delivery—before the real cardholder catches on.
    But with the right screening tools, you can screen and block suspicious orders.
    Together, these procedures serve as bodyguards in the space between you and the card.


MyWatchmen knows how to protect your business.

Fraud prevention is crucial for financial success.

It’s even more important if your business depends on contactless transactions.

Yet, when you have a company to run, fighting fraud feels overwhelming.

We’ll change that.

MyWatchmen will make CNP a route for profit instead of thieves.

Our experts know how to create, implement, and manage online security practices that best suit your needs.

Ready to increase your bottom line? Contact us at 1-888-256-2845 or info@mywatchmen.com.

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