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Education

Fighting fraud online responsibility for fraudulent orders and provide refunds
to customers.
and in the aisles This puts them at risk of financial loss, including the

costs of refunding scammed customers and potential
fees imposed by acquiring banks for chargebacks. It's
imperative for merchant service providers to help store
owners understand these distinctions and implement
effective fraud prevention measures to protect themselves
and their customers.
Combating fraud in retail
Preventing fraud and reducing chargeback rates require
specific measures. While EMV chip technology reduced
card-present fraud in the retail industry, retailers remain
susceptible to various fraudulent schemes and attacks.
By Elie Y. Katz ATOs are prevalent, where fraudsters exploit customer
National Retail Solutions accounts for unauthorized rewards or payment usage.

he COVID-19 pandemic impacted credit card First-party misuse, or friendly fraud, involves customers
fraud trends by fueling explosive growth in disputing legitimate purchases for false reasons. Delivery,
card fraud activity. Fraud involving existing curbside pickup, and BOPIS (buy online, pickup in store)
T credit cards jumped 69 percent in 2021 from orders are particularly vulnerable to first-party misuse
the year before, resulting in $9 billion in costs. During due to the difficulty in proving them false. Retailers also
the pandemic, a significant amount of fraud shifted from face the risk of CNP fraud, such as card testing, wherein
physical stores to ecommerce sites, with criminals focus- fraudsters attempt small purchases to see if cards are still
ing on stealing personal information to make fraudulent valid.
purchases online.
Ignoring the risks of fraud and chargebacks can lead to
Trending types of credit card fraud include card-not- escalating attacks, higher rates of fraud and chargebacks,
present (CNP) fraud, phishing, smishing and vishing and costly fees. Even a tiny fraudulent transaction can result
schemes, and account takeover (ATO). Phishing uses in substantial revenue loss and fees. Additionally, card
emails and links, smishing uses text messages or common networks monitor fraud and chargeback rates, potentially
messaging apps, and vishing uses voice calls and resulting in fines, restrictions or loss of merchant accounts.
voicemails to obtain sensitive information. In an ATO Thus, retailers must develop comprehensive strategies to
attack, a fraudster gains unauthorized access to a user's combat fraud and minimize chargebacks.
online account credentials. Building a strong defense

Credit card skimming involves using a device to steal Combatting credit card fraud in retail environments
credit card information, such as the card number and requires a layered approach incorporating multiple
expiration date, from a card's magnetic stripe. Criminals preventive measures. Retailers can adopt five best
use this information to make unauthorized purchases or practices to prevent credit card fraud effectively and
create counterfeit cards. Skimming devices are placed on thereby significantly reduce credit card fraud and protect
ATMs, gas pumps or other payment terminals and are their businesses:
often difficult to detect.
Picking up the tab In 2022, the Federal Trade Commission received 440,631 reports of

Regarding credit card fraud, store owners must understand credit card fraud, making it one of the most common types of fraud in
their liability in accepting online orders versus in-store the United States.
purchases. In a card-present (CP) transaction, where the
cardholder is physically present at the POS, the merchant Card-not-present (CNP) fraud, which includes online and MO/TO trans-
can verify the card's authenticity through identification actions, accounted for approximately $5.72 billion in losses in the U.S.
checks and chip-enabled cards. A merchant that follows in 2022, according to Insider Intelligence.
proper security procedures is not liable for fraudulent
purchases; the responsibility lies with the issuing bank. The Nilson Report forecasted that U.S. losses from card fraud will
amount to $165.1 billion in this decade alone.
However, in CNP transactions, where the cardholder is
not physically present, the liability shifts to the merchant. According to Insider Intelligence data, this year, CNP fraud will account
Without the ability to physically inspect the card or for $9.49 billion in loss, up 8.5 percent over last year.
confirm its legitimacy, online merchants must bear the
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