The Complete Guide To Processing Card-Not-Present Transactions

Card-not-present transactions allow businesses to accept payments without physically handling a customer’s card. Because the cardholder and card are not physically present, these transactions carry a higher fraud risk and typically cost more to process.

In this guide, we’ll explain how card-not-present payments work, how they differ from card-present transactions, what they cost, and how businesses can reduce fraud.

Card-Present VS Card-Not-Present Transactions

A card-present transaction occurs when payment information is captured in person by swiping, inserting, or tapping a physical card or supported digital wallet at a card reader.

A card-not-present transaction occurs when the card information is entered or stored without being read by an in-person card reader. Manually keyed transactions are generally treated as card-not-present, even when the customer and card are physically present.

Digital wallets can fall into either category. Tapping Apple Pay or Google Pay at an in-person terminal is card-present, while using a digital wallet online or in an app is card-not-present.

Common Card-Not-Present Transactions

• Online and in-app purchases
• Payment links and digital invoices
• Mail and telephone orders
• Recurring and card-on-file payments
• Manually keyed transactions

Common Card-Present Transactions

• Chip card payments
• Contactless card payments
• Mobile-wallet payments made at a physical terminal
• Swiped card payments

How Much Is A Card-Not-Present Transaction?

Card-not-present transactions usually cost more to process than card-present payments because they carry a greater risk of fraud and chargebacks.

With flat-rate pricing, processors typically publish higher rates for online, manually entered, and card-on-file payments. With interchange-plus pricing, the processor’s markup may stay the same, but the underlying interchange rate is generally higher for card-not-present transactions.

Rates also vary by payment channel. Online checkout, digital invoices, virtual-terminal payments, recurring billing, and manually entered transactions may each have different pricing.

Card-Not-Present Processing Rates Among Popular Credit Card Processors

Provider pricing changes frequently and may depend on the merchant’s plan, card type, transaction method, and sales volume. Check the provider’s current pricing before applying.

Manually entered payments may cost more than online transactions because they often lack some of the security and authentication built into an online checkout. However, businesses can still use tools such as AVS, CVV verification, and fraud screening to reduce risk.

The Cost Of CNP Credit Card Fraud

Card-not-present fraud can cost businesses more than the original transaction amount. If a fraudulent payment results in a chargeback, the merchant may lose the sale, the product or service provided, and an additional chargeback fee.

Card-not-present payments carry a substantially higher fraud risk than card-present transactions because the physical card cannot be verified at checkout. However, liability may depend on the payment method, authentication used, dispute reason, and evidence the merchant provides.

Businesses may also face operational costs from reviewing suspicious orders, responding to disputes, replacing merchandise, and strengthening fraud controls.

Protecting Your Business From Card-Not-Present Fraud

No single security tool can prevent every fraudulent payment. Businesses should combine secure payment handling with several transaction-level fraud checks.

How Do Card-Not-Present Transactions Affect Your Business?

Card-not-present payments can increase processing costs and expose your business to greater fraud and chargeback risk.

Online businesses should account for these higher costs when setting prices and choosing a processor. Brick-and-mortar businesses should also train employees to avoid manually keying card details unless necessary, since keyed transactions are generally treated as card-not-present.

The good thing is that if you process with one of the best small business credit card processors, they will actually do the bulk of this security work for you, going a long way to protect your business from CNP fraud and its costs.