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Types of Card Fraud – Part 1: Card Not Present

Published on 02/02/2017 - Updated on 05/08/2023

Over the next few months, we’ll be offering an overview of the different types of card fraud that affect e-commerce merchants.  This scenario is particularly tricky in Brazil and it might seem like there is a general agreement that fraud is just the cost of doing business.  However, understanding the various types of fraud as well as the behavior of fraudsters is essential to minimize the losses generated each year by online fraud and scams and to maintain the financial health of the business. To start the series, let’s talk about Card Not Present fraud.



Overview of the Brazilian Market


Brazil is second only to México in the global ranking of card fraud, according to the Global Consumer Card Fraud 2016 report, by ACI Worldwide. The study points out that the country is an attractive market for fraudsters and scammers, especially due to the importance of e-commerce in Brazil. Many online businesses do not use efficient local fraud prevention tools and there’s a lot of room for improvement in this area. Using a fraud prevention service that allows real-time transaction monitoring and is calibrated to understand Brazilian consumers shopping behavior, such as PagShield, is key to reduce fraud rates in the country.


Moreover, it’s worth noting that Brazilian consumers are far more likely to display risky behaviors regarding their data. Over 27% of those interviewed affirmed to leave their smartphones unlocked while not in use, 23% dispose of documents with account information, such as bank statements, in the bin, and 22% use their online banking or buy online without security software or while connected on a public computer/network.


What is Card Not Present Fraud?


As the name indicates, this type of card fraud is one in which the user does not physically present the card during the fraudulent transaction. For that reason, card-not-present fraud can happen in online transactions as well as those conducted over the phone.


Usually, the card information is obtained through discarded receipts, bank statements and other documents containing cardholder and card details or by gaining access to the physical card. Nonetheless, these details can also be stolen electronically, through online phishing and less commonly through cyberattacks to a merchant’s database.


Card-not-present transactions will remain, in most cases, undetected until the cardholder receives the card bill and verifies charges for purchases he didn’t make. As with all online fraud types affecting e-commerce businesses, when card-not-present fraud happens, the merchant bears the loss.


Banks, card acquires, payment processing services and other e-commerce solutions have developed sophisticated technologies to help detect this and other types of online fraud. PagBrasil offers PagShield, a fraud prevention solution based on unique technology with intelligent self-learning buying behavior analyses. Besides fighting fraud in real-time at low cost, PagShield’s technology is specifically designed for the Brazilian market with features optimized for local particularities, such as checking the address provided against the IP geo-location.

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