Understanding Card Not Present Transactions

What is a Card Not Present Transaction?

As the name suggests, a Card Not Present (CNP) transaction occurs any time a payment is processed without a physical credit card. Instead, the credit card information is entered by hand either by the consumer or the merchant. CNP transactions are most common for online orders or other remote transactions, such as via fax or phone. 

By contrast, Card Present (CP) transactions indicate a direct interaction with a customer and credit card. CP processing involves actually swiping or dipping the credit card in a reader at the point of sale. 

What Are Some Examples of CNP Transactions?

CNP transactions are not new, but they gained significant traction in the wake of COVID-19. The ability to accept payments remotely became essential for businesses to stay open during lockdown, and consumers have since developed a general preference for shopping online. 

These days, nearly every kind of business accepts remote credit card payments. But some of the more common forms of CNP transactions involve:

• E-commerce, which includes all online purchases of goods and services
• Auto-payments or recurrent online transactions, such as subscriptions
• Take out and delivery food services (this includes phone orders as well as mobile apps)

Fees and CNP Transactions

Just as you are charged certain fees for physical CP transactions, you are also responsible for fees each time you complete a CNP exchange. One of these is known as the interchange fee. This is the percentage a card-issuing bank charges a merchant each time the card is swiped or entered remotely. 

Interchange fees cover handling costs and mitigate risks associated with approving payments, such as fraud or chargebacks. Credit card fraud accounts for tens of billions of dollars in losses annually, and the majority of these losses are shouldered by the issuers. 

Without the need for a physical card and other validating factors, such as a PIN, signature, or ID card, CNP transactions are associated with a much higher risk of fraud. Because of the increased risk in approving these kinds of payments, the interchange fees for CNP transactions are usually higher than when the card is present.

Tips for Lowering CNP Fees

The interchange fees assessed for your CNP transactions will vary, but there are certain steps you can take to help reduce overall costs:

1. Use a merchant services company that includes built-in fraud tools, such as zip code and IP address verification.
2. Require full customer addresses for remote transactions.
3. Fill in as many fields as possible.
4. Keep all information organized and protected.

Get Help Processing Credit Card Payments

If you are interested in accepting credit card payments, both in person and remotely, a merchant services broker is a great place to start. Summit Payments matches businesses with the perfect merchant services provider while continually looking for ways to reduce fees and increase security. Contact our office today to see how we can help.