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A guide to preventing CNP fraud in your e-commerce business — Retail Technology Innovation Hub


If you closely follow our previous recommendation, then you will have enough data to track user behaviours.

It will enable you to detect if something fishy is occurring on your site. In order to extract as much money as possible, fraudsters frequently operate at a quick pace and use several stolen card numbers in succession.

While doing so, they end up following specific patterns. If you can detect these patterns, you would be able to figure out if your business is facing a fraud attempt. Remember, not every fraudulent payment attempt immediately impacts your business. Some may take time to negatively affect your business.

For instance, fraudsters may occasionally test a card by typically conducting small purchases.

If the purchase request is successful, the fraudsters may probably use the same stolen card to buy more expensive things in the future, which may eventually harm your company over time. So, keep an eye out for any disparities.

Here are some of the red flags to be aware of:

●      Abnormal volumes of chargeback requests

●      Multiple modifications to a single account in a short period of time

●      Multiple (read hundreds of) login attempts from a single account

●      A large number of reward points transfer

●      Mass volumes of password change requests

●      Suspicious changes in VPN, ISP, and browser traffic

●      Change in the shipping address

●      Same IP or device but multiple profiles

●      Different card users using the same IP address

●      Virtual machine or emulator usage

4. Pay attention to security

When operating an online business, you can never overlook the importance of web security.

Online fraudsters have the leverage of attempting fraud from anywhere on the globe. They are on a constant lookout for security loopholes. Therefore, it has become extremely important for e-commerce businesses to secure their sites from all possible aspects.

If you don’t take appropriate precautions, your site might run into a security nightmare. We are sure you don’t want that to happen. The best way to avoid that is to have the necessary tools and infrastructure in place.

For instance, as an online merchant, your goal should be to meet PCI (Payment Card Industry Data Security Standard). If you accept credit card payments on your e-commerce site, ensure following the norms mentioned below:

●      Create and maintain a secure network to guard credit card information

●      Safeguard cardholder data

●      Conduct regular vulnerability scans

●      Put in place stringent access control measures

●      Periodically check and test networks

●      Maintain a policy for information security

●      Deploy advanced security tools and frameworks

5. Create risk scoreboards

When seeking to reduce CNP and other frauds, you must first have a clear risk profile at hand.

Calculating risk and establishing your thresholds are the key here. Building a risk model would help you to predict bad customers based on your predetermined thresholds.

Through risk scoreboards, you can group users based on various metrics, including behavior, data, and risk scores.

This process would provide you with adequate information on potential fraudsters. It would help you spot fraud early and minimise potential financial and reputational damage facing your e-commerce business.

These scoreboards are sophisticated. They require users to employ statistical models for complex calculations.

However, conducting such complex calculations doesn’t require everyone to be statistics geniuses. There are computer models that will do the task on your behalf.

6. Detect fake disputes

Okay, so you have taken enough precautions to detect CNP fraud attempts. Now your system should be full-proof and it would track down all the fraud attempts by “professional” digital conmen, right? Well, that’s right but what about ”subtle” frauds?

Sometimes, a customer may purchase something on your site and later change her mind, only to claim it fraudulent and seek chargebacks.

Often, users may use their real card and then complain about having lost their card, claiming their recent purchase to be fraudulent. Unauthorized access to other family members’ credit cards is also a major challenge for an e-commerce business.

These all are examples of “subtle” frauds. In these cases, your customers are at fault. At the end of the day, your profitability is going to get a hitting.

So how can you counter these fake disputes? The answer is “data.” If you have enough data at hand to claim that it was a customer’s fault, authorities like banks may come in your support when such disputes arise.

So, what exact kind of data should you consider gathering? Well, do you remember we talked about data enrichment earlier? In this case, you must hunt down all social media posts using specialised tools based on certain hashtags.

For instance, watch out for posts where your customers show off certain products that match the one that they previously disputed as a fraudulent purchase. If both products are the same, bingo, you have proof.

Final word

Now that you have got a fair bit of knowledge about CNP fraud and various metrics to detect it, we believe your e-commerce business will be much more secure.

Make sure you have the right fraud prevention strategies in place.

Remember, it all boils down to how much data you track and how you analyse it. At the end of the day, how you use this analysis to detect abnormal customer behaviour patterns is all that counts.

Have fun running your e-commerce business. We wish you all the best.

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