How to prevent contactless payments fraud in mobile, CNP transactions
The coronavirus pandemic accelerated the digital transformation to eCommerce. Part of that transformation was the rise in contactless payments, as consumers became more conscious of person-to-person contact. In the first quarter of 2020, Mastercard saw a 40% increase in contactless payments, including tap-to-pay and mobile pay.
Just as it implies, a “contactless payment” eliminates contact between clerks and customers. It removes the need for cash or cards to change hands. In the digitally accelerated world, contactless payments make it possible for consumers to make purchases using debit or credit cards, mobile wallets, or payment apps. To complete a transaction, the consumer’s payment method (i.e., their card, mobile wallet, or payment app) uses radio frequency identification (RFID) technology and near-field communication (NFC).
All the consumer has to do is tap their card on — or hold their device near — a point-of-sale system with contactless payment capabilities. The presence or absence of a physical card means contactless payments can be card-present or card-not-present (CNP) transactions. Let’s explore the difference between card-present and card-not-present contactless payments, as well as how to prevent contactless payments fraud.
What is a card-present contactless payment?
Some retailers may call a card-present contactless payment the “tap-and-go” or “tap-to-pay” payment method. In these transactions, a customer is in physical possession of their debit or credit card. If their debit or credit card has a chip, it uses RFID technology.
There’s no need for the consumer to swipe their card into the point-of-sale system, enter a personal identification number (PIN), or sign their name. Instead, the customer holds their card up to a contactless payment terminal, typically marked by a contactless payment symbol.
What is a card-not-present (CNP) contactless payment?
In a card-not-present contactless payment, consumers may not have their physical debit or credit card on them. Instead, they’ve added a payment card to a mobile wallet or another payment app. CNP contactless payments are typical at businesses that allow consumers to redeem eGift cards in person, have apps that store card information, or have mobile reload card options.
When it comes to CNP transactions, businesses need to remember that fraud liability shifts to them whenever a physical card isn’t present. And, today, consumers have a lot of options for contactless payments through mobile wallets and apps. They may keep their payment cards on their smartphones with Apple Pay, Google Pay, Samsung Pay, or Masterpass, among others. In any of these cases, store clerks may scan barcodes on customers’ smartphones, or customers may hold their phones up to a contactless payment terminal.
Prevent fraud on the rise in mobile, card-not-present contactless payments
Kount’s 2018 Mobile Payments and Fraud report found that almost 30% of businesses surveyed accepted payments from mobile wallets. And 47% of businesses surveyed said the mobile channel was very important for their organization’s overall strategy. But, at the time, 38% of businesses said mobile fraud attempts had increased. Mobile, card-not-present contactless payments are just as susceptible to fraud as ever, so businesses will want to take measures to prevent it.
One of the best ways to prevent mobile payments fraud from CNP transactions is to implement an AI-driven fraud prevention solution. A solution like Kount Command is built on a global network of fraud and trust-related signals, including payments, location, and digital identifier data. With the help of its AI and machine learning, Kount analyzes these data signals and delivers accurate identity trust decisions.
Let’s say a bad actor attempts to make a mobile payment with a stolen credit card. Analyzing fraud and trust signals, for example, Kount can help businesses recognize when someone is attempting to make a payment outside the geolocation the device is typically used. When payment activity doesn’t align with the device’s or card’s payment patterns, it may indicate fraud.
Kount bases its identity trust decisions on each customer’s purchasing habits and each business’s unique policies and thresholds. Kount helps block transactions with low trust levels and allow transactions with high-trust levels. Kount helps challenge transactions in the middle with appropriate step-up authentication. This process ensures that good customers proceed to payment without friction and riskier transactions are challenged appropriately.