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Card Not Present Transaction: CNP Payments Explained

Card Not Present Transaction: CNP Payments Explained

Get comprehensive insights into card-not-present transactions, their significance and emerging tech trends.

Offering its in-store and online customers multiple ways to make payments is fundamental for every business. Your customers want options, and it’s your job to meet their needs. 

Today, a customer can still make purchases even if they don’t have a payment form in hand through a card-not-present transaction. In fact, that’s the term used for purchasing without being physically active. 

In 2021, card-not-present transactions comprised 33% of all transactions, an increase from 31% in 2020.

What Is a Card Not Present (CNP) Transaction?

In the case of a card-not-present (CNP) transaction, a cardholder or credit card isn’t physically present while making a payment. This transaction is typical for remote fax, Internet, mail, or over-the-phone orders. 

Unlike “card present” transactions, when payment details are provided in person at the time of the sale, CNP transactions are completed without the merchant examining the card visually.

what is a card not present transaction

Examples of CNP Transactions

Card-not-present (CNP) transactions come in various forms, catering to the diverse needs of businesses and customers. These transactions allow payments to be processed remotely, without the physical presence of a card or cardholder. 

From online shopping and phone orders to recurring payments and mail orders, CNP transactions make it easier than ever to complete purchases securely and conveniently, no matter the location.

Online Shopping

Online shopping is buying products or services over the Internet, allowing customers to shop from anywhere. During this online transaction, customers provide their card number, security code (CVV/CVC), and expiration date. The merchant processes the payment using these details, usually with the help of a payment processor and gateway.

cnp transaction

Buy Online, Pick up in Store

This is similar to online shopping, with the difference that the customer picks up the order in-store instead of having it delivered. This unique shopping experience saves on shipping. It also offers a faster fulfillment option without the usual wait for conventional delivery.

Mail Orders

When ordering through mail, customers fill out a form providing their billing information and mail it to the company. Mail orders were used frequently before online shopping became popular, and some people still use them today. 

Although online shopping has become very popular, many consumers still prefer traditional forms of purchasing or do not have access to the Internet. For such consumers, mail orders are still relevant. 

Phone Orders

A phone order is a card-not-present transaction where customers provide their card details and billing information to a salesperson over the phone, who then processes the charge. 

This type of transaction is useful for customers who prefer verbal communication or cannot access online shopping platforms. Phone orders also allow businesses to cater to a wider range of customers, ensuring a seamless purchasing experience regardless of the customer's preferred transaction method.

Card-On-File Payments

Card-on-file payments are a common type of card-not-present transaction. Here, a merchant stores customer cards and payment information, billing customers when appropriate after being authorized by them.

card not present transactions

Online Invoices

Using online payment systems, businesses send invoices for customers to pay electronically. The invoices can be paid with credit or debit cards, digital wallets, or bank transfers.

credit card not present during this transaction

Card-Present vs. Card-Not-Present Transactions

The difference between card-not-present and card-present transactions may seem simple. But, it involves more than just the physical presence of the credit card. 

A card-present transaction is identified by the capture of electronic data when the sale occurs. This can be accomplished by magnetic strip card swiping, tapping an NFC/contactless digital wallet connected to a stored card (like Apple Pay on a smartphone), or inserting an EMV chip card. 

We explored some examples of CNP transactions. Let’s now list a few examples of card-present transactions:

  • Contactless terminals
  • Card readers connected to smartphones or tablets
  • Countertop card machines
  • POS card-reader-equipped systems

All other payment methods fall under the category of "card-not-present" transactions.

what is a card not present transaction

How to Accept a CNP Transaction Securely

There are various ways that businesses can securely accept card-not-present transactions:

  • The use of eCommerce shopping carts that help with online payments for purchases made on websites
  • Online invoice systems that allow businesses to send and receive electronic bills remotely
  • Virtual terminals enable businesses to process credit card payments. They can do this over the phone or by inputting payment data from paper forms.
  • They can develop payment acceptance apps using payment APIs. The APIs provide custom solutions tailored to their unique needs. 

These methods ensure that CNP transactions are processed smoothly and securely. 

CNP Transaction Processing Fees and Costs

When businesses process card-not-present payments, they incur fees similar to those charged for processing credit cards in person. 

These include:

  • interchange fees
  • assessment fees from card brands like Visa and Mastercard
  • risk and PCI compliance fees
  • the payment provider's markup

Interchange fees tend to be higher for CNP transactions due to the increased risk of fraud and chargebacks. 

As a result, merchants typically end up paying more for CNP transactions than for card-present transactions. The total cost of CNP processing fees varies depending on the industry and the payment processor's markup. The markup is calculated using a formula that considers these factors.

Depositfix Payment Gateway Cost Calculator

Most businesses processing card-not-present transactions also require a clear understanding of payment gateway fees and the ability to calculate them accurately. 

In fact, these fees, influenced by factors like international charges, transaction volume, and subscription revenue, directly impact a company’s profitability. All of these factors make payment gateway fees complex to understand. 

Fortunately, you can simplify this process with the DepositFix Payment Gateway Fee Calculator. You don’t only get a base percentage but an accurate overview of your costs. This calculator can help you better understand your true expenses and improve your financial planning.

credit card not present during this transaction

Emerging Technologies in CNP Transactions

Advances in CNP transaction technology are revolutionizing the way businesses process payments, enhancing efficiency, security, and customer experience. As consumer expectations grow and digital payment methods evolve, these emerging technologies are shaping the future of payments.

Blockchain Technology

Blockchain technology creates a decentralized and unalterable ledger system, which enhances transaction transparency and ensures the integrity of digital payments. By enabling secure and verifiable transactions, blockchain is poised to play a major role in reducing intermediaries and streamlining the payment process.

Artificial Intelligence and Machine Learning

AI/ML algorithms can analyze large amounts of transaction data in real-time, identifying patterns that improve decision-making and drive smarter payment processing. These systems are continuously improving, becoming more adept at handling novel payment methods and ensuring operational efficiency in digital transactions.

card not present transaction fraud

Natural Language Processing

NLP allows businesses to analyze customer communication, such as emails and chat interactions, to gain valuable insights into consumer behavior. By understanding customer intent and sentiment, NLP is helping businesses enhance personalized experiences and customer engagement during transactions. It is also used to find any signs of phishing or social engineering. By issuing alerts, NLP helps to prevent fraudulent transactions.

card not present transaction fraud

Biometric Verification

Biometric verification, including facial, fingerprint, or voice recognition, is becoming an essential part of the transaction process, offering an additional layer of security and user convenience. These biometric identifiers are more seamless than traditional authentication methods, and they significantly reduce friction during payment processing.

card not present transaction fraud

Behavioral Analytics

Behavioral analytics tracks customer behavior patterns and uses advanced algorithms to provide insights that help businesses improve user experience. By analyzing purchasing habits and transaction history, businesses can offer more tailored services and enhance overall customer satisfaction.

card not present transaction news

Enhancing Card-Not-Present Transactions With Depositfix

Companies that take orders over the phone can greatly benefit from tools like DepositFix. The company is invaluable for businesses operating in sectors such as coaching and training. Imagine a salesperson offering personalized coaching sessions over the phone. During the call, the client expresses interest in a particular program and is ready to purchase. 

In this case, the salesperson can smoothly obtain the client's credit card information and securely process the payment using DepositFix. DepositFix handles card details with top security and ensures compliance with industry standards. It also provides a smooth purchase experience for the client and the business.

credit card not present during this transaction

Conclusion

Card-not-present (CNP) transactions continue to be a cornerstone of modern commerce, offering unmatched convenience and flexibility for both businesses and consumers. As technology advances, the future of CNP transactions promises even greater efficiency, personalization, and accessibility. 

With innovative tools like blockchain, AI, and biometric verification, businesses can stay ahead of evolving customer expectations and create seamless, secure payment experiences that drive growth and satisfaction.

FAQs

What industries benefit the most from CNP transactions?

Industries like eCommerce, subscription-based services, online education, travel, and telemedicine benefit significantly from CNP transactions. These sectors often operate remotely, where physical card presence isn’t feasible, making CNP an essential payment method.

Are CNP transactions suitable for recurring payments?

Yes, CNP transactions are ideal for recurring payments, such as subscription services or memberships. Businesses often use card-on-file systems to automate recurring billing, ensuring seamless payment experiences for customers.

Can small businesses efficiently handle CNP transactions?

Absolutely. Small businesses can leverage affordable tools like payment gateways, virtual terminals, and invoicing systems to handle CNP transactions securely. These solutions are scalable and cater to the unique needs of smaller enterprises.

How do CNP transactions handle currency conversion for international payments?

Most payment processors handling CNP transactions offer automatic currency conversion for international payments. This ensures that businesses and customers can complete transactions in their preferred currencies with minimal hassle.

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