There’s nothing more frustrating than realizing you’ve forgotten your credit or debit card at home right when you reach the front of the checkout line. For many, you’d assume this was the end of the road for intended purchase — Time to get out of line, put your stuff back, and head back home. However, there is still a way that you can still purchase without having your card physically with you. You don’t even have to be present, either. This is what’s called a card not present transaction, sometimes referred to as a CNP transaction, and it’s quite common (even if there are risks associated with it).

These days, card not present transactions typically take place online over the internet or remotely over the phone — fax machines and even the mail used to be other popular methods of CNP transactions, but these are less common today. But what is card not present transaction exactly, and how does a CNP transaction work? And what are those aforementioned risks? Let’s take a look at the ins and outs of the CNP transaction to find out the answers to these questions and more.

Card Not Present Transaction Explained

A card not present transaction — or CNP transaction — is the term used to describe a purchase made when neither the cardholder nor their credit or debit card are actually present for the transaction.  

Card present transactions, on the other hand, occur when a person’s payment details are captured in-person with both the cardholder and their credit or debit card present at the time of the transaction. In other words, any time a card, a chip, or a phone is physically swiped, inserted, or tapped.

Some of the most common examples of CNP transactions are online purchases or e-commerce transactions, phone orders where card info is read out loud, recurring payments or automatic billing that are set up to take money from a person’s account on a fixed schedule, and online invoices that are paid over the internet.

Flaws With the CNP Transaction

As you might have imagined, card not present transactions are a huge target of credit card fraudsters: These days, CNP fraud is 81% more common than card present fraud. This is because it’s quite hard for a merchant to verify that the person making the purchase is the cardholder. Because of the far greater risk associated with card not present transactions, some banks or card issuers will charge merchants a much larger transaction fee for routinely handling CNP transactions.

If fraud is reported following an unauthorized CNP transaction, the merchant account’s bank is required to process a chargeback. This differs from the protocol with fraudulent card present transactions, where the card issuer would be liable for processing the chargeback. The card security code system — or CVV2 — has been established to try and reduce the number of fraudulent CNP transactions, but still, they persist. E-commerce CNP fraud rose from $3.4 billion to $4.57 billion between 2015 and 2016 (the last year with reliable data), and there’s little doubt these numbers continue to rise today.

The Bottom Line: What Is Card Not Present Transaction?

Card not present transactions have long been a convenient way to purchase without actually being present to do so. However, CNP transactions can also prove to be troublesome for both cardholder and merchant alike. Shockingly, credit and debit card fraud is expected to reach a staggering $34.66 billion in 2022. The convenience and prevalence of CNP transactions across phones, internet, fax, and mail will only see these numbers continue to rise.

This is destined to result in a serious amount of chargebacks and countless other fees for merchants. As a matter of fact, it’s estimated that every dollar of fraud costs merchants and retailers $3.36 per transaction. NMA can help your small business avoid these fees altogether. That’s because, at NMA, “We Work For You®.”

About NMA

NMA is a merchant advocacy group dedicated to reducing or eliminating the unnecessary fees associated with accepting credit card payments. Since 2004, NMA’s payment processing solutions have been delivering tailored solutions, best-in-class customer service, and high-quality service offerings for businesses across multiple industries. Whether it’s high-risk or low-risk, brick-and-mortar or e-commerce, NMA will create the best processing experience for your company. For more information, visit us at our website or by calling (866) 509-7199.