Combating the Rising Tide of CNP Fraud

PYMNTS interviews Kevin Lambrix, senior vice president and merchant acquiring risk leader at KeyBank, about the competing factors that limit measures against card-not-present (CNP) fraud and what can be done about them.

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Card-present security features such as EMV chips have pushed fraud toward CNP transactions, and consumer eCommerce demand is fueling that growth. Larger and more sophisticated eCommerce players are reasonably effective at combating CNP fraud, Lambrix told PYMNTS, but newer players are often underprepared to meet the security challenges. While businesses take fraud more seriously once they have been burned, the rush to get a product to market and the assumption that turnkey platforms have fraud prevention baked in can leave novices vulnerable.

Security protocols such as 3D Secure are valuable only if they are implemented, and that may require regulatory involvement. In the United States, there are currently no requirements to implement 3D Secure, a protocol that makes it more difficult to commit CNP fraud, Lambrix said. Merchants are left to weigh the cost of implementation against the immediate benefits to themselves. Often the potential losses from fraud — at least from the merchant’s perspective — are of less concern than the potential losses from being unable to run less secure transactions.

It will take a mixture of education and the right tools — for consumers as well as businesses — to keep ahead of CNP fraud. Lambrix said the industry has yet to come together to implement CNP fraud standards because different solutions may fit better for different situations. On the other hand, businesses are also inherently motivated by revenue, and if a solution will reduce their fraud exposure in a way that makes fiscal sense, they will be interested. Getting there is a matter of helping companies understand the available tools and how they can benefit from them.