Payment processing, whether it’s for a brick-and-mortar store or an eCommerce store, can be quite tricky to navigate. Although, with the latter, the added risks that come with not having the physical credit card available do make things slightly more difficult.
What was just described is a Card-Not-Present (CNP) transaction.
In simpler terms, a Card-Not-Present transaction is any transaction where the customer’s credit card information is manually inputted into a terminal or gateway. The added risk for fraud comes from the fact that the people behind the scenes (the banks and the payment processor) are unable to properly verify the card with their equipment.
As a merchant, the importance of Card-Not-Present payment methods is obvious — it opens up a completely new way of accepting payments from your customers. But of course, there’s a little bit more to them than that:
Card-Not-Present vs. Card-Present Transactions
If we really break it down to the specific details, then a Card-Not-Present transaction is any transaction where the following is not applicable:
- A card is swiped on a terminal.
- An EMV chip is inserted into a terminal.
- An NFC/contactless card reader confirms authorization.
All this amounts to is the fact that, as the name implies, the card is not present during the transaction. So, even if the customer were stood there right in front of you, credit card in hand, so long as the card does not actually come into contact with the terminal it is a CNP transaction.
These types of transactions occur online or over the phone, including the following:
- Online shopping
- Subscription billing
- Digital invoices
- MOTO (Mail Order|Telephone Order) payments
- Manual card entry in-app
- Mobile wallet payments
- Card-on-file payments
Card-Present transactions, then, are the exact opposite. They are conducted in-person and with the card present for proper verification. Example of CP transaction methods include:
- Traditional Credit Card terminals
- Point-of-Sale (POS) systems with card-readers
- Contactless readers
- Card readers built-in to smartphone or tablet
Why Does it Matter?
Now, let’s talk about why the distinction between CNP and CP transactions matters, and why you as a merchant, should know about Card-Not-Present Transactions. There are multiple reasons for these, of course, but the main ones are:
Card-Not-Present Transactions = Higher Risks
When compared to CP transactions, Card-Not-Present transactions are associated with far more risk. There are ways of alleviating these risks, fortunately, but they are an unavoidable part of anyone in the business of selling goods or services remotely.
The risk only increases for those who belong to a ‘high-risk’ industry or those who process large volumes of transactions (also those who sell big-ticket items regularly).
And, as a result of these added risks, you would probably be hard-pressed to find a payment processor that would be willing to approve your application for a merchant account (never mind one that would have the necessary know-how and experience required to support the special needs that come as a result of these risks.)
Card-Not-Present Transactions = Higher Costs
The cost of processing CNP transactions is difficult to pinpoint — as it is highly dependent on the type of payment processing that your business requires and the rates that are imposed by your chosen processor.
It is a fact, however, that CNP transactions are generally more expensive than CP transactions — in more ways than one, with the added cost mainly coming from the bulked-up security required to address the risks that come with these types of transactions.
Choosing a Card-Not-Present Payment Processor | Platinum Payment Systems
Now that you have a better understanding of how Card-Not-Present transactions work and why you must be able to distinguish between them and CP transactions, the only thing that’s really left for you to do is to find the right payment processor for your business.
As mentioned, because of the higher risks involved with CNP transactions, it’s more important than ever that you have solid backing from a processor that has the experience and the know-how required to guide you through the process appropriately.
At the very least, you should look for the following in your chosen processor:
- Excellent Customer Service
- Transparent and Fair Service Fees and Processing Rates
- Up-to-Date Technological Equipment and Support
But, if you really want to succeed, it’s important that you consider the processor’s strengths as well. Choosing Platinum Payment Systems (PlatPay), for example (a merchant processor that caters to merchants that deal with both high-risk and high-volume transactions regularly) would be a good way of alleviating the stress that comes from the issues that merchants face with CNP transactions — as it is something that they have plenty of experience supporting their existing clients with.