Understanding the risks

Internet card payment transactions are classed as Cardholder Not Present (CNP) transactions. CNP transactions have always involved an element of risk in regard to fraud because the card and cardholder are not present at the time of the transaction.

Whenever you seek Authorisation for an Internet card payment, you are checking, via Barclaycard Business, with the cardholder's card issuer to determine if it will approve payment. However, authorisation from the card issuer is not a guarantee of payment nor does it confirm that the person placing the order is the genuine cardholder.

If the genuine cardholder should dispute the transaction at a later date or any discrepancies arise, the card issuer may resort to a chargeback via Barclaycard Business to recover the funds from you, even if the transaction has been authorised.

Fraud facts

The two most prevalent methods of fraud are:

• Identity Fraud

With identity fraud the card itself is not stolen. However, thieves assume the identity of a cardholder using information gained from credit card receipts and email or phone scams that prompt cardholders to voluntarily provide personal and card information.

Thieves use the advantage of anonymity on the net to commit fraud.

Stolen Cards:

The card itself is stolen and used before the owner detects it is missing. This method is used less often to commit fraud on the Internet than identity fraud.

Often, fraud is only discovered when the genuine cardholder receives their statement containing the fraudulent transaction. Under these circumstances, the cardholder may contact their bank and:

• Claim that the card number was used fraudulently
• Deny the transaction
• Advise that the card has been stolen
• Claim that the card number has been used without his or her authority

This dispute may lead to the Card Issuer charging back the transaction to you, the merchant.

You may not be able to prevent some Chargebacks but you can adopt criteria which will allow you the opportunity to use your commercial judgement as to whether or not you send out the goods - it is entirely your decision.

Lost revenue on stolen goods

Remember - the first cost of fraud is the lost revenue on stolen goods.

The risk of 'lost revenue' is that you despatch the goods to a fraudster in good faith - then lose the payment because of a chargeback when the fraud is detected.

The anonymity of the Internet presents you with little or no way to identify that the customer is the genuine cardholder.

The speed of the transaction makes it difficult to detect fraud before the goods are despatched.

You may not be able to prevent the transaction taking place but you can prevent the goods being despatched, if you are suspicious.