Card-Not-Present Fraud Anxiety

When bank customers use a debit or credit card to make a purchase, the bank profits from a merchant interchange fee.  With waning earnings in other bank service areas, interchange income represents a steady source of revenue.  Naturally, bank’s want to encourage payment card usage to keep this revenue stream flowing.  But cardholders these days are increasingly anxious.

Account data breaches and increasing card fraud continue to impact consumer behavior.  Despite the fact that fraud only impacts a fraction of one percent of all purchases made with payment cards – according to data from the Federal Reserve – it represents one of the biggest concerns amongst consumers.  Payment card fraud creates cardholder anxiety and negatively affects shopping behaviors.

Fraud Anxiety

CNP card fraud continues to impact consumer behavior.

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Online Shoppers Are Especially Leery 

Card-not-present (CNP) fraud has taken root, is growing rapidly, and is targeting e-commerce sales.  Javelin consulting firm reports that the total value of fraudulent e-commerce transactions will nearly double from $10 billion in 2014 to nearly $19 billion in 2018 — making CNP the dominant card fraud type in the U.S.  Aite Research reports that CNP fraud now represents 45% of total U.S. card fraud. 

Much press has heralded U.S. EMV® implementation as the silver bullet solution to fraud.  But EMV® was primarily intended to reduce the risk of counterfeit fraud.  Aite Research confirms that EMV® implementation efforts will not eliminate fraud, nor will EMV® end database breaches — fraudsters will simply adjust their tactics and targets.

Perhaps more sobering to financial institutions and merchants is a recent Sparks Research survey that reports 56% of cardholders decrease online shopping, reduce payment card usage, or close payment card accounts altogether after facing a fraudulent event.  This change in consumer online shopping behavior is a direct revenue killer — alarming for banks and merchants alike.

Cardholders Want Added Security

With online, on-site and card technology advances, you would think that cardholder security concerns would subside.  Wrong.  Recent breaches have exposed weaknesses in payments security and consumers clearly want more protection.  According to a CNP Consumer Impact Study, 78% of online shoppers want more protection for their payment card when shopping online.  The same study reports that 67% of consumers are willing to adopt a new behavior or process to increase their security when shopping online.

Banks have a vested interest to soothe cardholder anxiety and to mitigate their own risk.  The best protection against payment card fraud is to know your customer — especially when they’re not standing in front of you.

Technology has advanced multiple fraud-prevention tools, now available to bankers and issuers.  Arcot RiskFort® evaluates the fraud potential of each online access attempt, and then calculates a risk score to help clients determine to either approve or decline the transaction.  Biometrics authentication has made in-roads with card security by measuring and analyzing a cardholder’s physical and behavioral characteristics for transaction approval.  Producing an auto-generated string of random numbers, One Time Passcode is more secure than a static account or log-in password — a way for you to confirm that your cardholders are who they say they are.   

One Fraud Prevention Tool Is Not Enough 

Realistically, any single-point solution is more vulnerable to fraud.  “Multi-layering” — or combining security solutions — enables bank issuers and merchants to more securely authenticate payments throughout systems and networks. 

Anticipating fraud attacks and leveraging multiple technology innovations helps you to protect your business — and your cardholders’ account information.