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In today’s digital world, if a customer doesn’t have a form of payment present in hand, they can still make purchases. How? Making a purchase without being physically present is called a card-not present-transaction. With more and more people purchasing goods from home through eCommerce sites, nearly £4.5 trillion globally in 2024 alone, being able to service card-not-present transactions is important for keeping existing customers and attracting new ones.
What is a card-not-present transaction?
CNP stands for “card not present”. A card-not-present (CNP) transaction occurs when neither the cardholder nor the credit card is physically present at the time of the transaction. It’s most common for orders that happen remotely – over the phone or by fax, internet or mail.
A transaction is only considered to be “card present” if payment details are captured in person, at the time of the sale. This occurs when cards are physically tapped to a contactless reader or a PIN manually entered into a card reader by the customer. Today’s credit cards also have additional security features called EVM chips, which creates a unique transaction code that cannot be used again.
Examples of card-not-present transactions and how to process them
There are a number of CNP transactions that you probably come across every day. Here are the most common types and how you can accept and process them.
Online purchases: When a customer buys goods on the internet or through an eCommerce transaction.
You can accept online purchases through the shopping cart system on your website, or you can create an online payment link to share with customers across multiple channels.
Phone orders: When a customer provides the credit card information over the phone to your business.
You can use a virtual terminal to accept payments over the phone: you input the customer card details into a secure web-based interface.
Recurring payments: Payments that are set up to bill automatically, such as memberships or subscriptions.
Ask your customers to authorise recurring charges to their card at specified intervals, then securely keep the card on file and schedule the payments.
Online invoices: Digital invoices with payment links embedded so that customers can pay them online.
The embedded payment link will take customers to a secure payment gateway; they make the payment and the funds are transferred to your account.
What are CNP fees and processing costs?
Just like processing credit cards in person, your business will have to pay to process CNP payments. For Square customers, this is 2.5% per keyed in payment. As a refresher, the three main types of credit card processing fees that make up your rate are interchange fees, assessment fees (charged by card brands like Visa and Mastercard) and your payment provider’s mark-up.
Generally, card-not-present fees are higher because of the increased chance of fraud and card-not-present chargebacks. These higher processing costs are then passed down to the merchant, which is why card-not-present transactions are usually more expensive than card-present transactions.
Understanding card-not-present transaction fraud and how to prevent it
CNP fraud is a type of credit card scam in which a defrauder uses someone else’s compromised card information to make a remote purchase. Because both the card and cardholder aren’t physically present (and fraudsters often steal complementary information like the CVV and billing address), it can be difficult for merchants to verify the purchaser’s identity. According to UK Finance, In 2023, CNP transactions made up over £360 million worth of fraudulent activity in the UK. Payments experts expect this number to gradually increase with the growth and adoption of eCommerce.
At Square, we’ve engineered security into all our products to ensure that all your payments are secure. These security services add additional steps to customers’ shopping experience where the Card Verification Value (CVV) and billing address are cross checked before an order is finalised. If this information does not match the information provided by the customer, the order can be blocked.
An address verification system (AVS) is an effective way to verify the address of the person claiming to own the credit card. The system checks the billing address of the credit card provided by the customer with the address on file at the credit card company. This is why most payment processors, including Square, will ask you to verify your customer’s billing address before authorising a CNP charge.
FAQs about card-not-present transactions
What does card not present mean?
Card not present (CNP) means a payment transaction where the customer’s physical card isn’t scanned, inserted or tapped at the time of purchase. This includes online shopping, phone orders, recurring payments and any transaction where card details are manually entered or stored rather than physically presented to a card reader.
What does card not present mean on pending transactions?
When you see “card not present” on a pending transaction, it indicates the purchase was made without the customer physically presenting the card. The transaction has been authorised but not yet fully processed.
Is CVV required for CNP?
While CVV isn’t technically required for CNP transactions, it’s highly recommended that businesses request the CVV to reduce fraud risk. A card’s CVV code isn’t stored in the magnetic stripe or chip, so it proves that the customer has physical possession of the card.
What’s the difference between a card-present and a card-not-present transaction?
In card-present transactions, the physical card is used at the point of sale, allowing the terminal to read card data directly. Card-not-present transactions occur remotely without the physical card, such as online or phone purchases, where card information is manually entered or stored electronically, generally carrying higher processing fees due to increased fraud risk.
How to process a card-not-present transaction with Square Virtual Terminal
Square Virtual Terminal is a product offered by Square that lets you safely process credit cards over the phone. Simply open your Dashboard and turn any computer into a virtual POS system – no card reader or software needed – and for just 2.5% per keyed in payment.
Here are the steps to process a CNP transaction on Virtual Terminal:
- Sign up for your free Square account.
- On your Dashboard screen in the left side panel, click on Virtual Terminal.
- Click Take a Payment.
- Enter the credit card details for the transaction. You will need to enter the final order amount along with the customer’s credit card number, expiration date, CVV and billing post code. The optional note field is great for leaving a personal thank you or to detail items.
- Click Charge.
By following these CNP transaction tips, you’ll be ready to take card payments from your customers no matter where they are. Learn how card-not-present payment processing fees work with Square.
