Card-Not-Present Exposes Retail’s Omni-Channel to Fraud

A recent survey by the National Retail Federation stated that 59% of shoppers planned to shop online this past holiday season. This statistic validates that, for the first time, online is the more popular choice for shoppers. This trend acts as a catalyst for traditional retailers to shift towards offering omni-channel experiences to consumers. 

Merchants who have stayed ahead of the curve have adopted various omni-channel experiences that cater to the individual consumer and present a branded experience across all touchpoints.  The downside to merchants rushing to deliver a consistent customer “experience” is that they have become vulnerable to increased attacks, greater fraud and the subsequent loss of brand reputation.  Two factors accelerating fraud within the omni-channel experience are customer expectations and connected data systems.

The Customer Experience

Today’s customers expect a seamless experience. At their fingertips, customers want to download coupons, check prices and purchase products in store, or via a kiosk, desktop computer, or mobile app.  This evolving demand by the consumer is placing the burden on the retailer to deliver near instantaneous approval of an order and test the capability of their fraud solutions.  An enterprise fraud solution must have the ability to instantaneously certify the identity of the customer and confirm with a high level of probability that the transaction is legitimate.  

Connected Data Systems

Connecting data systems that involve online and brick and mortar transactions is difficult, especially for legacy store fronts.  In addition to supporting various transaction types and platforms, retailers must be cognizant of fraud that can exploit when systems are not connected.  For instance, the scam buy-online-pick-up-in-store (BOPUS) has gained momentum over the past year.  In this scenario, customers order in a card-not-present environment (mobile device, laptop, etc.) and then pick their order up in the store.  This scenario exposes a retailer’s backend systems that are not connected, which allows fraudsters to exploit one channel against another. For example, a retailer might be attacked by fraudsters who order merchandise with a stolen credit card online while standing in the store. Once the fraudulent order has been accepted, the fraudster simply picks up the item in store.  By the time the retailer realizes that it is a victim of fraud, it is out of the stolen merchandise and having to absorb the charge as a loss.

While there are many hurdles to successfully introducing an omni-channel experience, it is critical that organizations support the customer experience with an enterprise fraud solution and that they shore up the connections between their data systems.  Fraudsters don’t comply with any rules and therefore continue to change their tactics and strategies to maximize gains.  Retailers need to be cognizant of the evolving threat of fraud and the influence that it has on revenue, resources and brand reputation.

Today, omni-channel is being introduced by the largest retailers that have the resources and budget to support its delivery and maintenance. As technology continues to be developed, omni-channel will become a viable and affordable platform that every retailer will have to embrace.  At the center of every omni-channel experience, retailers should begin with fraud to protect their assets and their brand.

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