It is most commonly used for payments made over the Internet, but can also be used with mail-order transactions by mail or fax, or over the telephone.
Card-not-present transactions are a major route for credit card fraud, because it is difficult for a merchant to verify that the actual cardholder is indeed authorizing a purchase.
[4] Shipping companies may guarantee delivery of goods to a location, but they are normally not required to check identification and they are usually not involved in processing payments for the merchandise.
CNP merchants must take extra precaution against fraud exposure and associated losses, and they pay higher rates for the privilege of accepting cards.
Merchant associations have developed some prevention measures, such as single-use card numbers, but these have not met with much success.
[5] The United States Federal Trade Commission uncovered an operation running from 2006 to 2010 that netted more than $10 million in fraudulent charges on credit and debit cards.