Card Not Present: Knowing the Payment Process


Revel Blog | Revel Systems | November 2, 2021 |

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A large portion of the world’s economy is based on card payments in some way. In fact, customers all across the world swipe, scan, or touch their cards on a regular basis. Sales made through “card not present” (CNP) credit card methods account for an ever-increasing percentage of total card transactions. But what is CNP and how can it increase your business? 

What is a Card Not Present (CNP) Transaction? 

A card not present (CNP) transaction is one in which the actual card is not presented to the merchant, but is instead performed through a phone, the internet, the mail, or a mobile device. Only if payment information is recorded in person at the moment of sale is a transaction considered "card present" (CP). Typically a CP is when a card is physically swiped, tapped, or slid through a reader, or an EMV chip is processed.

However, it’s important to note that even if a customer is physically present with their credit card in their possession, the transaction can be regarded as a CNP, meaning the card didn't tangibly interface with the terminal.

CNP vs. CP Transactions 

Credit card processing using a countertop card terminal or point of sale (POS) station is standard in card-present transactions. A card-present transaction includes making a contactless card payment using a digital wallet. The retailer can also swipe the customer's card using a smartphone or tablet card reader, or insert an EMV. Card not present transactions include things like mail orders and over-the-phone purchases. Additionally, card not present transactions include eCommerce sales and recurring payments (or subscriptions).

Why Should You Care about CNP Transactions? 

A card not present merchant account will cost your organization money, just as processing credit cards in person does. Interchange costs, assessment fees (paid by card companies like Visa and MasterCard), Risk and PCI Compliance, and your payment provider's markup are the sorts of credit card processing fees that make up your rate.

Interchange costs for CNP payments are often higher since the risk of fraud and chargebacks is more significant when the card is not present. These extra processing expenses are subsequently passed on to the retailer, which is why card-not-present transactions are typically more expensive.

Because card not present transactions come with certain inherent dangers, cautious businesses may decide not to accept these purchases. However, this would make it impossible for company owners to run online retail companies. With recent years' strong eCommerce development, limiting an enterprise to in-store sales might result in a significant revenue stream loss.

The Card Not Present Transaction Process

Managing and processing your card not present transactions properly is one of the most critical things you can do to protect yourself and your organization. Processing a CNP transaction entails obtaining adequate consumer data, such as the client's contact and card info, including:

  • Contact number
  • Email address
  • Billing address
  • Delivery address
  • Name as it appears on the card
  • The number of the credit card
  • Expiration date 
  • The card's CVV security code

It’s important to note that while all of these factors are essential, the security code provides an additional degree of safety for your company when handling a CNP transaction.

Defending Against Chargebacks

Today's organizations need to reduce the number of chargebacks it receives if they want to remain afloat. Because a CNP transaction is more vulnerable to chargebacks than a CP transaction, it's more critical to safeguard against them. The simplest method is to provide information online and on credit card statements to clearly explain where the purchase was made and how to return or exchange it.

To do this, you should provide the following:

  • A detailed explanation of the products and services you provide
  • Contact details for customer service
  • Policies for returns, refunds, and order cancellation
  • Policy on delivery

You can also submit a copy of your return policy with any receipts you give out to consumers. This practice is a good-faith gesture that reflects well on your intentions as a merchant. It simplifies the return procedure for consumers if the sizes, colors, measurements, and other factors aren't suitable for their needs and a return is required.

Whether your business includes CP transactions, CNP transactions, or a healthy mix of both, it's best to take proactive steps to avoid chargebacks and minimize your risks as a merchant.

Protecting Your Business from CNP Fraud

Combating card not present fraud can be emotionally draining. It also diverts a small business owner's attention away from tasks that will help the business develop. As a result, the ideal way to fight against theft is to create a well-thought-out fraud protection strategy.

Compliance with the Payment Card Industry Data Security Standard (PCI DSS)

Meeting predetermined data security criteria will aid in the prevention of CNP fraud. Payment Card Industry Data Security Standards (typically shortened to PCI) should be followed by businesses that process credit and debit cards. These guidelines, taken together, set out what a firm must undertake to secure its consumers' data.

Fortunately, meeting the PCI requirements is simple. A stringent certification procedure is required of all payment processors, payment gateways, and equipment providers. This rigorous assessment guarantees that the company's goods meet industry data security standards.

Address Verification System (AVS)

The address verification system (also known as AVS) is a central database that stores credit card billing information for customers. Merchants use the AVS to ensure that a CNP payments customer's billing address matches the card owner's. By completing this address verification, the merchant will be able to avoid a fraudulent transaction.

Card Security Checks

A client must submit their credit card CVV code (or security code) to the merchant during this CVV check. You can find this three-digit number on the back of the card (an American Express card has four digits).

3-D Safety

Using a 3-D secure code adds an extra degree of protection to a CNP transaction for retailers. The code has different variants for Visa, MasterCard, and American Express.

A MasterCard SecureCode sequence, for example, necessitates entering a PIN code into an online window. This window is hosted securely by the issuing bank, and the merchant never sees the number. This additional authentication step improves security while also lowering merchant liability.

Card Not Present Transactions: Best Practices

To improve the security of CNP payments, merchants and all customer-facing team members should be appropriately trained in these practices.

Incorporate improved data gathering techniques

Data enrichment is the most efficient approach to acquiring more information about your customers while minimizing friction. Simply said, data enrichment is the act of gathering different data points from your clients and using them to get extra information about them through a third-party service.

You may check if your user has been involved in any fraud by looking up their name and address. You can also look up their email address to see whether it's linked to any social media profiles. Or you can check if your client's IP address appears to be shared by dozens of other credit card users.

Keep an eye out for card testing

Microtransactions are one of the most prevalent fraud-related payment types. Before making a major purchase, the fraudsters would usually test the card with a small amount of money to determine if the credit card data they acquired is valid and if the connected account contains any funds. Detecting card testing right away is a fantastic method to catch fraudsters before they can cause severe harm with a large payment.

Implement KYC strategies

If your systems are confident that the transaction is fraudulent, you can request that the user supply a large amount of Know Your Customer (KYC) data so that you can be assured that the transaction is real before allowing it to proceed. If your systems have discovered a rare occurrence that barely activates your fraud detection algorithms, on the other hand, you can ask the user for fewer and easier identity verification techniques.

Secure Your Card Not Present Transactions with Revel Systems

Card not present transactions are only becoming more commonplace, and you can safely expand your business with the help of Revel Systems. Through our unique POS system, you can diversify your income sources by allowing your clients to buy online whenever they want. You'll expand your business to take on more orders, attract (and keep) loyal clients, and boost sales. Contact us today for a free demo!