KIS Payments

When Card Not Present (CNP) leads to “Customer Negates Payment”

As a merchant you want to make sure that you always keep your processing environment in consideration when you are accepting payment.

For example, if your business is in a face-to-face (card present) environment and you agree to accept a payment over the phone by manually keying the transaction, should that transaction be disputed by the cardholder there is a better than good chance you’ve lost against the chargeback before you even get a chance to respond. The minute you manually input the credit card information, as opposed to electronically capturing it (chip/swipe/tap) the transaction is considered Card Not Present or CNP.

When it comes to card payments, it does not matter if your customer is standing in front of you.  What matters is whether you can prove that the credit card was inserted into your terminal and that the individual using the card was indeed the legitimate cardholder.

Some useful suggestions that may help you to avoid chargebacks when you are accepting CNP payments are:

  • Provide your customers with all possible contact information and encourage them to channel their complaints to you first.
  • Be crystal clear with your return policy, as well as your shipping policies where applicable, and make certain that you can show that your customer understands them in their entirety before accepting payment.
  • Aside from verifying the billing address and Card Verification Value (CVV/security code), you can request the name of the card issuing bank as one of your purchasing policies. Failure to provide this should be considered a red warning flag. (Note: the name of the card issuing bank is found on the back of the card)
  • Always send confirmation e-mails to your customer. These should be automated e-mails which contain the invoice. If the products are being shipped, send another confirmation e-mail providing shipping details and tracking information as soon as you have it.
  • Whenever the shipping address provided differs from the billing address, you should confirm the information and exercise extra caution.
  • Many consumers ask for a chargeback when they do not recognize the charge on their credit card statement. Therefore, you will want to make absolutely sure that your company name and a clear transaction description will be reflected on their bill.

While the above suggestions can assist a merchant in preventing fraudulent transactions and successfully disputing chargebacks, they’re almost never enough.  Unfortunately, most chargebacks are not caused by fraud, identity theft, processing errors or the like.  The majority of chargebacks are caused by “friendly fraud.”

Friendly fraud is an industry term which refers to a fraud resulting from a customer making a purchase with his or her credit card, receiving the service or merchandise and then filing for a chargeback.  There is nothing friendly about this type of situation for a merchant.  In the face-to-face retail world, this would be shoplifting or stealing.  The perpetrators rightfully belong in jail when caught red-handed.  Not necessarily in the credit card world.

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