As commerce rapidly shifts to digital channels, merchants are seeing an explosion of card not present (CNP) transactions. From mobile checkouts to subscription billing, CNP payments are now the backbone of ecommerce. But with that convenience comes a serious threat: a significantly higher risk of chargebacks.
Understanding what CNP transactions are and why they’re especially vulnerable to chargeback abuse is essential for any merchant looking to safeguard their revenue and reputation.
What Is a Card Not Present (CNP) Transaction?
A card not present (CNP) transaction occurs when the buyer and the payment card are not physically present at the point of sale. This contrasts with card present (CP) transactions, where a chip, swipe, or tap occurs in person.
Common CNP scenarios include:
- Online purchases
- Mobile app payments
- Recurring subscriptions
- Mail or phone orders (MOTO)
Because the merchant can’t physically inspect the card or ID, these transactions rely on digital verification alone—opening the door to fraud and disputes.
Why CNP Transactions Are More Susceptible to Chargebacks
CNP environments lack the in-person safeguards that help validate legitimate transactions. This makes them a prime target for:
1. True Fraud
Stolen card information used without the cardholder’s knowledge. With widespread data breaches and phishing scams, CNP fraud has become easier to execute.
2. Friendly Fraud
A cardholder makes a legitimate purchase but later disputes the charge, claiming they didn’t authorize it or never received the product.
3. Merchant Error
Processing issues—like shipping delays, billing mistakes, or unclear return policies—can easily escalate into disputes in a digital setting.
Statistically, CNP transactions are up to 7 times more likely to result in a chargeback than CP transactions, according to industry reports.
How Card Networks Treat CNP Chargebacks
Card networks like Visa and Mastercard assign greater liability to merchants in CNP scenarios. Unlike in-person EMV transactions, there’s no liability shift protection—merchants are often assumed responsible unless they prove otherwise.
Typical CNP-related chargeback reason codes include:
- Visa 10.4 – Fraud: Card-Absent Environment
- Mastercard 4837 – No Cardholder Authorization
- Visa 13.3 – Not as Described or Defective Merchandise
Without strong authentication or compelling evidence, representing (fighting) these chargebacks is an uphill battle.
Strategies to Mitigate CNP Chargebacks
While you can’t eliminate risk, you can significantly reduce exposure with smart prevention tactics. Here's how:
1. Layered Payment Authentication
- Implement 3-D Secure (3DS2) for dynamic cardholder verification.
- Require AVS (Address Verification System) and CVV at checkout.
- Enable biometric or OTP-based login for account-based payments.
2. Use Advanced Fraud Detection Tools
Deploy fraud prevention platforms that use machine learning, device fingerprinting, and behavioral analytics to detect suspicious activity in real time.
3. Clarify Communication and Policies
- Display your return, refund, and shipping policies clearly.
- Send order confirmation and tracking updates promptly.
- Offer responsive customer support to resolve disputes before they escalate.
4. Collect and Retain Compelling Evidence
For CNP chargeback representment, collect:
- IP address and geolocation data
- Email delivery confirmation
- Proof of product download or delivery
- Screenshots of checkout and terms acceptance
Partnering with a chargeback mitigation platform like Chargeblast helps automate evidence collection and strengthen your dispute responses.
The Bottom Line: Convenience Comes with Risk
CNP transactions power the modern ecommerce experience, but they come with an inherent liability. The key is not to avoid CNP payments but to adopt a proactive fraud and chargeback prevention strategy.
Merchants who succeed in this space strike a balance between frictionless customer experience and robust verification protocols. With the right tools and processes, you can reduce chargebacks, protect your margins, and build long-term trust with your customers.
Want to see how alerts can transform your chargeback workflow? Request a demo below or get started yourself and let us show you how to prevent disputes before they happen.
