There’s money to be made out of CNP transactions. Online, mobile and phone orders are a highly tempting and potentially very lucrative target.


Customers all over America have been confused by the recent switch to cards with an embedded microchip. Lack of government support in education around the move to EMV (which is Europay, MasterCard and Visa — the name of the original developers), learning to “dip” instead of “swipe” and a wait of up to 20 seconds for authentication haven’t made things easy.

Worse, although the official adoption-rate deadline was in October 2015, many retailers haven’t yet brought on the system, so consumers have an inconsistent experience during checkout. This was initially partly due to retailer resistance to changing around during the busiest and most important shopping season of the year, but things are being held up even now by the fact that the card networks are behind schedule certifying the new machines. They haven’t got enough people to send out to do it. Merchants annoyed by unexpected delays and concerned by a rise in chargebacks aren’t impressed.

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You might think that with this delay, the expected rise in card-not-present fraud would be postponed as well. It makes sense that EMV adoption would cause CNP fraud to rise, as occurred in numerous other countries (in France, famously, it rose more than 360 percent), since when card-present fraud becomes more difficult, fraudsters sensibly move to an easier channel. But with EMV adoption half-hearted so far, you may expect the criminals to put off their own shift as well.

It hasn’t worked out like that.

Fraudsters, it appears, are more organized and better prepared than the card networks. They’ve been aware of the coming change for some time and they positioned themselves to get ahead of it. A recent Forrester report titled “Stop Billions in Fraud Losses with Machine Learning” indicated North American fraud losses would increase 55 percent by 2018. And it has already begun. Forrester indicated that fraud attacks increased by a substantial 163 percent just during the first three quarters of 2015.

Moreover, fraudsters don’t give up and they don’t want to risk their illicit income being stopped by a new kind of card — so the move online, even ahead of the EMV curve, is a logical one. Fraud is crucial to fraudsters’ bottom lines, and they’re individual, autonomous agents who don’t have to worry about process and compliance the way retailers or card networks do.

They’re also highly creative, they share information and techniques and they’re part of a sophisticated underground ecosystem. They know there’s money to be made out of CNP transactions. Online, mobile and phone orders are a highly tempting and potentially very lucrative target.

A fraudster’s success is an online merchant’s loss. The retailer takes the hit for a fraudulent transaction and all the associated costs — and with CNP fraud attacks on the rise, that means retailers without fraud prevention capable of meeting the challenges of modern e-commerce are facing huge potential loss.

And retailers — and their profits — could lose out from two directions.

Retailers lose when fraudsters win. But they also lose when, in response to the fraud threat, they insist on stringent fraud policies and outdated, risk-averse methods that reject and annoy good customers, thereby turning away good business. The solution to both problems is the same: full automation.

Traditional fraud prevention has relied on rules and manual reviews. Until recently there was no viable alternative, but cutting-edge technology means that’s no longer the case. Full automation, based on machine learning that learns and adapts with every single transaction, is now possible.

That’s just as well because it’s the only way to beat today’s agile fraudsters. Make no mistake: they’re adept at leveraging new technology to their own ends. By the third quarter of 2015, suspected botnet attacks had risen to an astonishing 82 percent of all fraud attempts in the U.S. With the kind of speed and sophistication available to fraudsters today, rules that need manual adjustment simply can’t keep up — especially when the sheer number of fraud attempts is rising anyway.

But fraud prevention can fall in line with the rest of your business and become consumer-centric. Fully automated, real-time fraud prevention won’t interrupt the purchase process — it won’t even be noticed by your customers, who will instead enjoy a swift, seamless shopping experience.

You’ll have happier customers, and more sales.

Bill Zielke is chief marketing officer of fraud prevention firm Forter, which offers solutions for online merchants. Prior to Forter, Zielke was a senior director and head of eBay Motors.

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