The biggest source of credit card fraud is that there's no standard way of proving that someone is in physical possession of the card.
Online transactions only require CC#/Exp/CV2 name/address etc which are stored on merchant machines and then compromised and released to the while.
A much more secure option would be to have CCs with built-in RSA key gen. Stealing the CC#s would no longer be enough to make a fraudulent transaction.
The CVV2 is not supposed to be stored in any merchant system, that's it's entire point! A merchant who does store it is actually violating their contract with the card issuer.
They are also violating the terms of their contract if they make fraudulent transactions on your behalf (to put it mildly). Which is why we're not worried about above-board merchants committing outright fraud, but we are worried possibly internal security holes through which your credentials may leak. The CVV2 is on their hardware while the transaction runs, which makes it vulnerable to unauthorized internal snooping.
I don't know how merchants like Amazon handle fraud, but they don't use CVV2 because they don't bill you until items ship.
Online transactions only require CC#/Exp/CV2 name/address etc which are stored on merchant machines and then compromised and released to the while.
A much more secure option would be to have CCs with built-in RSA key gen. Stealing the CC#s would no longer be enough to make a fraudulent transaction.