Three Conclusions Drawn from the CNP EXPO

We attended the CNP Expo a couple of weeks ago in Orlando and it was great to catch up on what is going on in the Card Not Present (CNP) ecosystem.  We were there to learn, listen and talk to prospective merchants, banks and potential partners.  Here are some of our take-aways.

1.  EMV Roll-out does not mean fraudsters get legitimate day jobs
While we have heard many experts’ predictions prior to the show, nearly everyone at the Expo was forecasting a major increase in CNP fraud with the impending roll-out of EMV chip cards.  We did hear a couple folks state that they were not sure there would be an increase in CNP fraud and they were summarily shot down by presumed experts.  That was some good humor.  However, it was very clear that the vast majority are predicting a significant increase in CNP fraud.  Like in Canada, Europe and Asia, when EMV rolls out, counterfeit fraud becomes extremely difficult so the wily veteran fraudsters are expected to shift their tactics to CNP fraud which is still relatively easy – especially with many card numbers still at play.

2.  There are a ton of vendors who want to help
A quick scan of the attendee list and a lap around the exhibit hall revealed that there was a very high vendor-to-merchant ratio.  Vendors know that the increase in CNP fraud is a problem that merchants rightfully fear.  If merchants don’t have measures in place to protect themselves and make it tougher on the fraudsters, they will see a spike in their fraud losses and a dip in their bottom line profit margin.

CNP VendorsThe exhibit hall was full of energy and solutions to solve problems for CNP merchants – here is a rough categorization of the vendors who were manning the booths.

  • Payments Companies              50%
  • Fraud Platform Providers         35%
  • Analytic Providers                   15%

As CNP fraud is perpetrated by expert and motivated criminals with evolving methods, each category of vendor plays a role in preventing fraud losses.  For the merchants, it’s a matter of setting up multi-layered defenses and making solution investments that reduce more fraud than it costs them to stop.  Selecting the right products and putting the solutions in the right sequence is tricky, so choosing partners who are transparent and are willing to prove their value is vital.

3.  For physical goods, fraudsters have their own ship-to addresses
For merchants who sell and ship physical goods, the fraudsters still need to get their hands on the physical merchandise.  While there was a lot of conversation about implementing a multi-layered approach to stopping the bad guys—device reputation, bad IP address flags, identity verification—there was very little discussion about putting controls around the mailing address.  Creating defenses around the perimeter undoubtedly have value and merit, but even with these protocols in place, the defenses get breached (I’m sure you’ve read about it).  There are internal decision criteria, address verification, and address reputation services available to scrutinize the ship-to address.  The last line of defense happens at the moment you decide to ship the merchandise—make sure you stay vigilant and take steps to make sure you are shipping your goods to your actual, valued customer.

Note:  ID Insight has recently developed some new capabilities that we will soon be making available to merchants to combat the rise in CNP fraud.  Stay tuned.

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Written by Adam Elliott
ID Insight President, Co-Founder
Adam has a passion for creating data-driven solutions that produce positive and measurable business results.  A recognized name in the analytics area, Adam has won numerous awards for marketing and training, including “Minnesotans on the Move,” the Gold Award at the Houston International Film Festival for analytics training and an award from the American Marketing Association for leading the creation of the largest B2B Webcast in Yahoo’s history.  When he’s not inventing new products, he’s on the ice coaching his daughter’s hockey team.

Date Posted: June 4, 2015 Author: Adam Elliott Category:   Featured, IDI Blog

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