Merchant Services 101

What Are Card Not Present (CNP) Transactions and Why Do They Matter?

Payment processing can seem like a tricky thing for many merchants and business owners. For processors, payments are typically divided into two categories:

  1. Card Present (CP)
  2. Card Not Present (CNP)

Here, we’ll explore CNP transactions and what they mean for payment processors and for your business.

What are CNP Transactions?

For all intents and purposes, a CNP transaction is any transaction in which one of the following does not take place:

  • A card is swiped
  • An EMV chip is inserted
  • Payment is accepted using an NFC/contactless reader

If one of the things does not occur, the transaction is considered to be one in which the card is not present.

Essentially it is a transaction in which the customer’s credit card information is typed into a terminal. Even if the customer is standing there with the credit card in hand, the transaction is considered CNP because the card itself did not come into contact with the terminal. CNP transactions also apply to any transactions conducted online or over the phone, such as:

  • eCommerce shopping carts
  • Online invoices
  • Automated billing
  • Home orders
  • Website payments

From the perspective of the payment processor, card brands, and issuing banks these types of transactions have a greater risk for fraud. After all, their equipment did not verify the card. Because of this increased level of risk, you’ll usually be charged higher fees for accepting these types of payments.

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CNP and Fraud Risks

Approximately 45 percent of all credit card fraud instances in the United States involve card not present, or CNP, transactions. There are many reasons for the increased risk. Not the least of which is that cardholder information is more difficult to verify if the card isn’t present. The other reason is that customers can argue they did not authorize charges or receive the products in question. Both of which could lead to chargebacks for your business.

This creates greater risks for all parties and can result in some businesses being identified as high risk merchants in the future, especially if you don’t take preventative actions to manage chargebacks.

Processing CNP Transactions Properly

One of the most important things you can do to protect yourself and your business is to manage and process your CNP transactions properly. This involves gathering sufficient customer information, including:

  • Phone number
  • Email address
  • Billing address
  • Shipping address

You also need to make sure you have all the necessary credit card information to properly conduct the transaction including:

  • Name as it appears on the card
  • Expiration date
  • Credit card number
  • CVV security code

While all are important, the security code adds another layer of protection for your business when it comes to accepting CNP transactions.

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Preventing Chargebacks

Reducing the number of chargebacks is vital for all businesses operating today. With CNP transactions offering an even greater risk for chargebacks than CP transactions, it is more important that you protect against them. The easiest way is by providing information online and via billing on their credit statements to clearly indicate where their purchase was from and how to make returns or exchanges. This means you must offer the following:

  • Complete description of the goods and services you offer
  • Customer service contact information
  • Return, refund, and order cancellation policies
  • Delivery policy
  • Complete business address

You might also include a copy of the return policy with any receipts you offer customers as well. This is a good faith gesture that shines favorably upon your intentions as a merchant and eases the process for customers if the sizes, colors, dimensions, etc. are not a good fit for their needs and a return is necessary.

Whether your business involves CP transactions, CNP transactions, or a healthy combination of the two, it’s good practice to engage in active efforts to prevent chargebacks and reduce your risks as a merchant.

Merchant services providers are not all created equal. BankCard Services is dedicated to helping you grow your business. We offer a wide range of features and services on a monthly basis without long-term contracts. Contact us today to learn more about how we can help you get more from your payment processor than a statement at the end of the month.

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