What is a card-not-present (CNP) transaction?

Editorial Team

4 min read
Online shopper holding credit card while shopping on laptop

There’s never been a more optimal time to buy products, services, and merchandise online than right now. Gone are the days when shopping was mainly limited to in-person interactions at brick-and-mortar locations. In fact, according to Insider Intelligence, the global eCommerce market is expected to surpass $6 trillion dollars in 2023, and by 2024, about 21 percent of total retail sales will happen online.

With this eCommerce boom also comes a rise in card-not-present (CNP) transactions. These transactions are intended to make purchasing items easier and more convenient for consumers who do more of their shopping remotely rather than in person.

While CNP transactions may expand your potential for revenue growth, they can also come with greater risk. Let’s break down what a CNP transaction is, and how you can help protect your business from being at risk for CNP fraud. 

What are card-present vs. card-not-present transactions?

Card-present (CP) transactions

Quite simply, card-present (CP) transactions refer to a physical payment card being presented by the cardholder at a brick-and-mortar location during the time of checkout. It is swiped, dipped, or tapped at a POS system or credit card reader to complete a purchase. 

Some examples of CP transactions include:

  • Swiping a card that has a magnetic strip
  • Inserting a chip card (EMV) into a card reader 
  • Tapping or waving a contactless card or mobile wallet, such as Apple Pay® or Google Pay™, over an NFC-enabled device

Card-not-present (CNP) transactions

Card-not-present (CNP) transactions, on the other hand, refer to a transaction in which neither the cardholder nor the credit or debit card are physically present when the purchase is made. 

Some examples of CNP transactions include:

However, keyed-in or manually entered transactions on a Virtual Terminal are also considered CNP transactions, even if the card and cardholder are present. This is due to the potential added risk for fraud, since a card cannot be verified with a PIN or signature by the processor or card network. There is also an increased probability of manual error when entering card numbers or billing information. 

CNP transaction fees

When customers use credit or debit cards, merchants are charged a processing fee whether the transaction is card-present or card-not-present. Because there is more risk associated with accepting CNP transactions, it can be more expensive for merchants to accept these kinds of payments. 

With CP transactions, buyers are more likely to receive a refund for their transaction without adding on additional fees for the merchant. CNP transactions, however, may come with an increase in chargebacks. If a cardholder does experience fraud via a CNP transaction, they can dispute the charge with their bank and receive credit from their card issuer. Chargebacks may come with additional fees for the merchant. To help keep your business from accruing costly chargeback fees, learn the difference between a chargeback and a refund and how to avoid them. 

What is CNP fraud?

CNP fraud occurs when a person uses stolen credit or debit card information to make purchases where they do not have to present a physical card–online, over the phone, or via mail. 

Criminals can steal information a number of ways, including:

  • Copying card information manually (ex. a restaurant server walking away with your card)
  • Using a card skimmer to extract payment data
  • Sending text messages, emails, or other phishing techniques to retrieve information

It’s a good idea to stay up to date on the latest fraud trends and scams and encourage your customers to be aware of the fraudulent tactics they may encounter when making eCommerce purchases. 

Reducing your exposure to CNP fraud

While CNP transactions can help enable sales no matter where a customer is located, they do come with a higher chance of payment fraud. In many cases, all a fraudster needs to complete a CNP transaction is a cardholder’s credentials. It can take longer for merchants to detect CNP fraud because the transaction may appear to look legitimate.

In order to help minimize your business’s chances of falling victim to CNP fraud, it’s important to use a secure payment processing platform, utilize fraud protection tools, and maintain PCI compliance. 

Clover’s guide to the six best practices for securing your eCommerce website can help you avoid CNP fraud and save your business from losing revenue. 

Interested in learning how you can build a secure online business with an eCommerce solution from Clover? Contact a Clover Business Consultant today.


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