As online purchasing has escalated over the last few years, so has card-not-present (CNP) fraud. With consumers using online and mobile methods of payment that don’t require the presence of a physical credit card at the retailer, fraudsters have taken advantage. They’ve become increasingly sophisticated and persistent. Currently, fraud via CNP costs nearly $10 billion a year. With fraud threats growing, retailers must find new ways to protect their businesses and customers.
In a recent PAAY and Industry Dive survey, 75% of retail executives said they were “extremely” or “very” concerned about the effect of fraud on their business. While most retailers can identify that CNP fraud has occurred, only a few can catch it before the transaction completes.
Furthermore, less than half of retailers think their current solutions are effective, and 7 out of 10 seek new solutions, with a spotlight on EMV 3DS.
- 76% of retail execs said they were worried about the effect of fraud on the business. Interestingly, 24% said they were only somewhat concerned, not too concerned, or not at all concerned. With fraud costs only increasing– they escalated nearly 20% from 2019 to 2022 –retailers must focus on prevention.
- Only 14% of retailers identify CNP fraud during the transaction when the fraud can be prevented. Most retailers identify fraud within one day of the transaction, but it takes one-third more than a week to become aware that fraud occurred.
- Retailers use a variety of tactics to address card-not-present fraud but struggle to balance fraud prevention strategies with providing the customer with a seamless experience.
- Survey respondents see EMV 3DS as the future. 48% of respondents currently use it, and 79% of those not using it say they will likely invest in it in the future. Retail execs said the top benefits they seek from the technology were 1) increased customer satisfaction with seamless transactions, 2) fewer cart abandonments, and 3) increased customer trust in the security of transactions.
The survey results highlight the need for retailers to continually upgrade their fraud detection systems, said Lauren Rossi, Senior Director Product, PAAY. “With the cost of fraud increasing, retailers cannot afford to only recognize it after it has occurred but must take steps to prevent it."
Rossi added that EMV 3DS can help retailers stay ahead of fraud and even help detect friendly fraud. "Remember, businesses with weak fraud prevention strategies become more open to all fraud types.”
 Bradley. (2022). Card Not Present Fraud: How Companies Lose Nearly $10 Billion Per Year. Merchant Fraud Journal. https://www.merchantfraudjournal.com/card-not-present-fraud/
 The True cost of FraudTM Study | LexisNexis Risk Solutions. (n.d.-b). LexisNexis Risk Solutions. https://risk.lexisnexis.com/insights-resources/research/us-ca-true-cost-of-fraud-study#ecommerce
In May 2023, Industry Dive partnered with PAAY to survey 152 retail executives on their perceptions of the business impact of CNP fraud. All respondents work for retailers that sell products via e-commerce. Of the respondents, 73% work for online/e-commerce stores or those that sell apparel or electronics. Seventy-eight percent of respondents hold leadership positions in finance or risk management, and just over half (58%) work for companies with annual revenues of $100 million or more.