Card Not Present transactions are payment methods for purchases where the customer cannot physically swipe or insert their card into a secure machine. These types of transactions include phone, mail order and online shopping.
For merchants who accept credit cards, CNP can be intimidating because it is not as widely used as other types of transactions. There is also the worry that CNP transactions cost more to process.
However, Card Not Present transactions do not necessarily cost more and can even be cheaper than swiping a card in some cases (online, for example). If the right tools and services are used to complete these types of purchases, merchants can pass on savings to customers and still reap the benefits of additional revenue.
What Is a Card Not Present (CNP) Transaction and Why Does It Cost More?
Many customers’ only experience with credit card transactions is swiping their cards through a secure machine at the point of purchase. This type of transaction, which can be done in-person or at home, is called card-present.
However, the majority of purchases are not made this way. More than half of all credit card transactions in the United States are completed through Card Not Present means, including online orders and phone transactions. The same goes for many international markets where mobile phones are more prevalent than traditional computers. Merchants who only accept card-present transactions may be missing out on a large chunk of revenue.
The cost of Card Not Present transactions has long been a topic of debate among credit card processors and merchants. Many people believe that CNP transactions are more expensive to process because they are considered high risk. This is because there is a greater chance for fraud in these types of transactions.
However, this is not always the case. In some instances, Card Not Present transactions can be cheaper to process than card-present transactions. For example, when a customer orders online and provides their shipping information, the merchant can save on processing costs because they do not have to pay for the cost of the physical card or for a card reader.
Merchants who are looking to expand their businesses into CNP transactions should not be discouraged by the cost of processing. There are many processors and services that are designed to help small businesses accept these types of payments. And, as mentioned earlier, Card Not Present transactions do not always cost more than card-present transactions. In fact, the right tools and services can make CNP transactions cheaper.
How to Save Money with Card Not Present Transactions (and Avoid Fraud)?
If merchants are accepting credit card payments through CNP transactions, it is likely they are experiencing some losses due to chargebacks or fraud. Since customers cannot physically swipe their cards when making purchases through phone, mail order or online, there are increased chances of fraud.
Fortunately, there are ways to reduce these occurrences and lower the cost of Card Not Present transactions for merchants. Phone orders can be protected with voice biometrics or two-factor authentication (voice plus PIN entry). Merchants who receive mail order payments can require additional information before processing an order, such as a billing address and phone number. And for online transactions, merchants can require additional information like billing and shipping addresses before completing the sale.
An important tip to remember is that the more data required by a merchant (and presumably less available to customers), the lower the chance of fraud or chargebacks occurring through Card Not Present transactions. If merchants are willing to take a few extra steps to ensure the security of their transactions, they can save money and avoid some of the risk associated with CNP payments.
Accepting Card Not Present payments is not only a great way for merchants to expand their businesses, but it can also be cheaper than swiping a card in some cases (online, for example). If the right tools and services are used, merchants can save on the cost of card-present transactions while expanding their reach to customers around the world.