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Credit Card Present Vs Card Not Present Payment Processing

card not presentAny business that takes credit card payments for purchases, whether it is a brick and mortar or online store, needs a merchant account to process customer debit or credit cards. When credit card transactions take place, the transaction is considered to be either ‘card present’ or ‘card not present.’

Like it sounds, ‘card present’ transactions are when both the customer and customer’s card are present for a credit card purchase of goods or services. If necessary, a merchant has the ability to perform a visual inspection or examination for the customer’s card at the time the transaction is being conducted.

So, card not present (CNP) transactions would be those in which the customer is not physically present to hand over the card for payment, right? Yes and no.

True card not present transactions take place when a customer provides credit card information for online, mail and telephone (MO/TO) order purchases.

Transactions can also be considered card not present when a customer is physically present and actually hands the debit or credit card over to be charged.

In these transactions, it’s considered card not present because the merchant processing the payment with their merchant account chooses to ‘key in’ the information into a virtual terminal (processing software) rather than swipe it through a credit card reader or terminal.

Given the choice when customers and their cards are physically present, it’s important for businesses to swipe credit cards through a terminal or use the smart chip port to process EMV cards. Of course this is only possible when a business has this equipment in place.

Other than the obvious, there’s a difference between keying and swiping. All card not present transactions, even customer-facing transactions that are keyed in, have higher credit card processing rates.

Why? Transactions made without the physical presence of a card are a major route of credit card fraud; therefore these are riskier transactions in the eyes of the credit card issuing banks.

Without seeing the physical card or cardholder, it is very difficult for a merchant to verify that the authorization for purchase is from the actual cardholder. Stolen credit card information can more easily be used for mail, telephone and online purchases.

Higher card not present rates help to mitigate the risk for the card associations and banks, but it’s doubtful that they recoup more than just a portion of the hundreds of millions lost to fraudulent charges each year.

With the incredible growth of ecommerce in recent years, card-not-present transactions have increased, as have the losses to fraudulent charges.

The good news is that technology continues to improve, making both card present and card not pressing transaction processing more secure. In the future, stolen credit card data may likely be worthless, as the encrypted data will be impossible to decipher.

If you have questions about card present or card not present transaction processing we’d be happy to help. Here at The Transaction Group, we’re experts in the merchant account industry and can even help to find the best credit card processing solution for your business’s needs. Call us at 888-383-8056.


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