Card-Not-Present Fraud: The Merchant Empire Strikes Back

  • ID: 4031669
  • Report
  • Region: Global
  • 23 Pages
  • Mercator Advisory Group
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U.S. Merchants Striking Back Against Card-Not-Present Fraud in Online Transactions

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The author's most recent research report, Card-Not-Present Fraud: The Merchant Empire Strikes Back, examines the current state of CNP fraud in the U.S. market and frames the market landscape for both online merchants and the fraud solution vendors that serve them.

E-commerce merchants in the United States now find themselves in a perfect storm of rapid online sales growth and the continuing EMV chip card transition. The convergence of these two trends has left merchants vulnerable to card-not-present (CNP) fraud. Cyberthieves are proving quite adept at using both technology and stolen payment card data to attain their ill-gotten gains. The well-documented breaches of payment card data at major retailers such as Target and Home Depot in the past few years have provided a treasure trove of millions of cardholder records that are being used by criminals to commit CNP fraud.

Despite anticipating that fraudsters would transition to online attacks once counterfeit card fraud at the point of sale was reduced through the EMV chip, U.S. payment card networks and issuers, payment providers, merchants, and cardholders are now asking: What can we do about the increase in CNP fraud? In response, an industry of technology developers providing solutions to combat CNP fraud has emerged to give online merchants the means to strike back. This research report delves into the current state of CNP fraud and where e-commerce merchants should go from here.

"Not unexpectedly, U.S. e-commerce merchants are caught in the crosshairs of CNP fraudsters who have shifted their attention away from point-of-sale transactions. Fortunately, several new fintechs as well as established technology companies have developed security solutions that show early promise in greatly reducing CNP fraud," comments Raymond Pucci, Associate Director of Research Services and author of the report.

Highlights of this research report include:

  • An overview of the current state of the U.S. CNP fraud landscape
  • Layers of anti-fraud measures available to merchants
  • Technology-driven methodologies used to counter CNP fraud
  • Profiles of many notable CNP fraud vendors
  • Recommendations for merchants to self-assess their risk exposure to online fraud
  • Considerations for merchants in CNP fraud management and vendor assessment
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FEATURED COMPANIES

  • Android Pay
  • Ethoca
  • IdentityMind Global
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1. Executive Summary

2. Wave of Card-Not-Present Fraud Hits U.S. Shores
A Tale of Two Channels
CNP Fraud Is Not New
Volume of E-commerce Sales Continues to Rise
The Cost of CNP Payments Fraud
Fraudsters Attack Vulnerability of Shifting Forces
Other Global Markets’ Experience After Migration to EMV
EMV Transition Status

3. The CNP Fraud Battle
An Arms Race
An Emerging CNP Fraud-Fighting Industry
Scoring Systems: Flexible and Tailored to Merchants’ Risk Tolerance
Black Box Systems: Algorithms Drive Sales Decisions
Like Goldilocks, Merchants Must Seek a "Just Right" Risk Solution

4. Tech Developers Come to the Rescue: Profiles of Notable Vendors
CyberSource
Ethoca
FICO
Forter
IdentityMind Global
IDology
Iovation
Kount
LexisNexis Risk Solutions
NoFraud
NuData Security
Riskified
Sift Science
Simility
ThreatMetrix
Vesta
Whitepages Pro

5. Vendor Selection Considerations for Merchants

6. Other Layers of Fraud Management for Merchants

7. CNP Fraud-Concluding Thoughts

8. Endnotes

List of Figures

Figure 1: U.S. E-Commerce Sales Growth, 2014-2025F
Figure 2: Merchant CNP Fraud Cost Categories
Figure 3: Status of U.S. Migration to EMV Chip Credit Cards
Figure 4: Status of U.S. Merchants’ Migration to EMV Payment Terminals
Figure 5: Status of EMV Cards and Card-Present Transaction Volume, 2014-2021F
Figure 6: Characteristics of the Two Main Methodologies for Detecting and Preventing CNP Fraud

List of Tables

Table 1: CNP Fraud Management Firms Active in Merchant E-Commerce
Table 2: CNP Fraud Vendor Selection Considerations for Merchants

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  • Android Pay
  • Apple Pay
  • CyberSource
  • Ethoca
  • FICO
  • Forter
  • IDology
  • IdentityMind Global
  • Iovation
  • Kount
  • LexisNexis Risk Solutions
  • Mastercard
  • NoFraud
  • NuData Security
  • Riskified
  • Samsung Pay
  • Sift Science
  • Simility
  • ThreatMetrix
  • Vesta
  • Visa
  • Whitepages Pro
Note: Product cover images may vary from those shown
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Note: Product cover images may vary from those shown
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