What Is a Card-Not-Present (CNP) Transaction?

As a merchant, you can accept credit card payments in different ways for goods and services supplied. There are two terms that you will hear bandied about, Card-Not-Present (CNP) and Card-Present (CP).

Let’s understand what a Card-Not-Present or Card-Present transaction is:

Card Not Present means that the merchant does not see the physical credit card and the card details are given via the Internet, over the phone, by mail, fax, or other means to pay for goods or services.

Card Present means that the cardholder hands the merchant their card to be swiped or to have its chip read, and the cardholder authorizes the transaction in person to pay for goods or services.

When will a CNP transaction most likely occur?

A Card-Not-Present transaction happens whenever the customer and the merchant are not in the same place. Card-Not-Present transactions are often the only practical payment method for online businesses that don’t have a physical store and don’t call on customers. This is mostly virtual transacting where all communication and purchases take place over the internet.  Card-Not-Present transactions are also used for mail-order and telephone order transactions.

When a customer buys a product or service online, they enter their billing information, shipping details and payment information into an online form. A customer can also browse a website and opt to order goods or services over the phone. In this case, the customer will provide all the same information over the phone, and the transaction is processed via the merchant’s virtual terminal. Direct mail orders work the same way.

Are there greater risks with Card-Not-Present transactions?

Yes, there are greater risks for merchants accepting CNP transactions for a number of reasons. The most obvious reason is that the merchant does not have the opportunity to verify the card personally. For example, the merchant may not be able to know for certain whether the order is being placed by the actual cardholder or someone posing as the cardholder.

This could be the misuse of a trusted spouse, partner, friend or parent’s card by someone close to them, or it can be outright fraud where the card details have fallen into criminal hands.

Either way, the merchant will potentially face a chargeback if the cardholder realizes that there are unauthorized purchases on their account. There are steps that a merchant can take to minimize fraudulent Card-Not-Present transactions and your merchant service provider will tell you how.

Of course, the benefit for merchants using Card-Not-Present transactions is that you can supply customers in different cities, states and even in other countries, so your business can expand and grow with online payment options. For most merchants this benefit outweighs the risk, many, many times over.  So, merchants shouldn’t necessarily be put off Card-Not-Present transactions, but they should consider making sure that they partner with a reputable merchant service provider who will guide them securely through the process.

To find out more about Card-Not-Present transactions, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.

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