What Is CP and CNP and How Can It Help Me Prevent Chargebacks?

Credit card fraud is on the rise and there are steps that you as a Merchant can and must take to ensure you are working alongside credit card companies and your customers to combat fraud. Fraud prevention is a critical step that allows merchants to protect customer information, complete transactions smoothly, and obtain guaranteed funds without concerns of a chargeback¹. Fraudulent transactions can occur in person, over the phone and online. Making yourself aware of what to look for can make a difference in your business.

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Card Present (CP) - It is important to follow the steps below when processing a credit card transaction:

• Swipe card through the terminal to obtain an authorization.
• Hold onto the card during the transaction; this will allow you to examine the card.
• Examine Card Security features to ensure the card is valid (magnetic stripe on back of card, hologram, CVV2², expiration date, name on front matches signature on back, card logo, bank name, and embossed account number).
• Refuse to process a payment transaction if the authorization request has been previously declined.
• Wait for an authorization response and obtain cardholder signature.
• Compare the signature to the card. Compare the cardholder name against the receipt to verify a match.
• Always provide your customer with a receipt for the sale.

Card Not Present (CNP) - This acceptance has a higher fraud potential. Follow these steps when accepting CNP transactions:

• Verify the card is legitimate by asking the cardholder for:
  • Expiration Date to include in your authorization request.
  • Card Verification Value 2 (CVV2)² found on the back of the card.
  • Address Verification (AVS)³ by requesting the billing address.
• Obtain an authorization.

Be on alert for any potential signs of fraud:⁴

• First time shopper.
• Large orders.
• Orders with several of the same item.
• Shipment to international address.
• Shipment to single address, but use of several cards.
• Multiple transactions on one card over a short period of time.
• Transactions with similar account numbers.

If you suspect fraud:

• Ask the customer for their day or evening phone number.
• Request additional information such as bank name on front of card.
• Confirm the order; you may send a note to the customer’s billing address rather than the shipping address to confirm the transaction is valid.
• Contact our processor verification line at 1-800-228-1125 with your merchant number and the card information to verify the transaction details to determine if name and address match what is on file.
• Report any suspicious activity to FiTech by Deluxe^®, our trusted provider of merchant services equipment, at (844) 822-1281, at any time, day or night.

Appropriate preventive action can help reduce fraudulent transactions and potential customer disputes.

• Use of the following tools and controls can assist in verification of the legitimacy of the cardholder and the card in every CNP transaction:
• Address Verification Service (AVS)—allows CNP merchants to verify the cardholder’s billing address with the card issuer. An AVS request is completed as part of the authorization process and the merchant receives a validation code indicating whether the address provided matches the address on file with the issuer.
• Card Verification Value 2 (CVV2)—the merchant enters the CVV2 code as part of the authorization request to the card issuer; this information is then verified and a validation code is sent back to the merchant with the authorization.
• EMV 3D Secure—allows e-commerce merchants the ability to validate a cardholder’s ownership of an account in real-time during an online Visa transaction. When a cardholder completes a purchase at the checkout of a participating EMV 3D Secure merchant, the merchant server will recognize the registered card and prompt the cardholder’s info to proceed with the purchase. The merchant will then send a 3DS request to the issuer who will confirm the cardholder’s identity and determine if any additional verification is needed. The issuer has a number of tools that can help verify the cardholder’s identity such as a one-time passcode or biometrics.
• Access instruments—be cautious with any keys, passwords, entry-codes; do not leave any information lying around for someone to access.
• Unauthorized individuals—be observant of any unauthorized personnel in your workplace.
• Documents—secure sensitive information from your work area at the end of the business day to avoid unauthorized access.
• Computer—be cautious of what information others can view on your screen; secure information should be protected when others are around.

Preventing chargebacks

Most chargeback situations arise at the point of transaction—at the time the transaction is completed—and most can be prevented with training.

How to avoid potential chargebacks:

1. Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline.
2. If you receive a “Call” message in response to an authorization request, call the authorization center at (844) 309-7601. Be prepared to answer questions. The operator may ask to speak with the cardholder. If approved, write the authorization code on the sales receipt. If declined, ask the cardholder for another card.
3. If an EMV Chip-enabled card is presented for payment, always ensure the chip is read through the reader for all card-present transactions. If the chip card cannot be read, you should seek another form of payment. Avoid keying/manual entering any transactions on EMV chip cards. If you cannot prove the card was present, (EMV chip is read) you may be subject to a chargeback.
4. Obtain cardholder signature. The cardholder’s signature on card-present transactions is required. Failure to obtain the cardholder’s signature could result in a chargeback for “no signature” should the cardholder deny authorizing or participating in the transaction. The signature on the sales receipt should be compared to the signature on the back of the card to confirm you have properly identified the cardholder.
5. Ensure that transactions are entered into point-of-sale terminals only once. Entering the same transaction into a terminal more than once can result in “duplicate transaction” chargebacks. Ensure that incorrect sale receipts are voided and that transactions are processed only once.
6. If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction. Your policy should be visible to your customer in your place of business or on your sales receipts. You may choose to write or stamp your refund/return policy information on the sales receipt near the customer signature line before the customer signs. Be sure the policy shows clearly on all copies of the sales receipt. Failure to disclose such policies at the time of the transaction will be to your disadvantage should the customer return the merchandise.
7. Settle your terminal daily—do not delay batching your POS machine. Failure to settle in a timely manner can result in chargebacks for “late presentment.”
8. If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer. It is recommended that you advise the customer in writing that the service, subscription, or membership has been canceled and state the effective date of the cancellation. Failure to respond to customer cancellation requests almost always leads to chargebacks.
9. Keep customers informed on the status of their transactions. If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
10. If the merchandise ordered by the cardholder is out of stock, delivery delayed, or if the item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction. Do not substitute another item unless the customer agrees to accept it. By giving the customer notice and the option to cancel, you may help avoid a customer dispute regarding the merchandise and a possible chargeback.
11. Ship merchandise before depositing transaction. Don’t deposit transactions with your merchant bank until you have shipped the related merchandise. If customers see a transaction on their monthly statement before they receive the merchandise, it could lead to a preventable chargeback.

¹ A chargeback refers to the return of funds to your customer. This return is initiated by the customer’s bank on their behalf to settle a dispute, error of charge, fraud, or incorrect authorization procedure. ² CVV2 (Card Verification Value 2) is a 3-digit number imprinted on the signature panel on the back of cards to assist CNP merchants in verifying that their customer is using a legitimate card. ³ The Address Verification System (AVS) is a system used to verify the numeric portions of the cardholder’s billing address. The system will check the billing address of the credit card provided by the user with the address on file at the credit card company. ⁴ These signs alone do not always indicate fraud; however, several of these signs can be considered suspicious.