Card-present vs card-not-present transactions

Learn what the difference is between card present and card-not-present transactions

Link to the author's page
November 3, 2023
Link to the author's page
Card-present vs card-not-present transactions

The distinction between card-not-present vs card-present at first may seem straightforward. But the emergence of alternative payment methods has created additional significance beyond just the physical presence of a card during a transaction, impacting your fraud risk and transaction fees.

In this article, we'll provide a clear understanding of these terms, providing real-life examples, and explain how both types of transactions can affect processing rates.

What is a card-present (CP) transaction?

Card-present (CP) transactions, also known as in-person transactions, take place when the customer physically hands over their payment card to the merchant at the point of sale (POS). This usually involves swiping, inserting, or tapping the card into a card reader or terminal. These types of transactions are frequently carried out in physical stores, where customers buy items in a face-to-face setting.

What is a card-not-present (CNP) transaction?

A card-not-present (CNP) transaction takes place when neither the cardholder nor the credit card is physically present during the transaction. This is most frequently seen in remote orders, such as those made over the phone, through fax, internet, or mail.

Even if a customer is physically present and provides their card for you to manually input the required information, the payment would still be categorized as card-not-present. To qualify as “card-present”, you must use a card reader. This is crucial as it can record electronic data, providing evidence that a card was used and properly authorized for the payment.

What is the difference between card-present and card-not-present?

Beyond just the physical presence of the credit card, a transaction is categorized as "card-present" only when electronic data is captured at the point of sale. This can be done by swiping a magnetic strip card, inserting an EMV chip card, or tapping an NFC/contactless digital wallet linked to a stored card, like using Apple Pay on a smartphone.

All other payment methods fall under the category of "card-not-present" transactions, even if the customer physically presents the card during the transaction.

Understanding whether transactions are categorized as card-present or card-not-present is important because the way the transaction is conducted can impact your processing costs, while it can influence your liability for chargebacks.

Examples of card-present vs card-not-present transactions

These are the most common types of card present vs card not present transaction methods…

Card-present transaction methods include:

  • Countertop card machines
  • Contactless terminals
  • POS Systems equipped with card readers
  • Card readers connected to smartphones or tablets

Card-not-present transaction methods include:

  • Online shopping carts
  • Manually-entered orders over the phone
  • "Buy" buttons on websites
  • Recurring payments or subscription billing
  • Payment apps that don’t use a card reader
  • Electronic invoicing

In each of the card-not-present scenarios mentioned above, even if the customer possesses the card, the electronic data (found on the magnetic strip or chip) was not provided with the transaction, therefore making it "card-not-present."

Card-present and card-not-present rates

The interchange fee is one of the most common types of transaction fees, referring to the charge from the cardholder's bank to the merchant's bank for handling a payment. It depends on factors like the type of transaction, card, and risk. 

When comparing card present (CP) and card not present (CNP) transactions, CP usually has lower fees because the physical card presence adds security, lowering the risk of fraud.

For CP transactions, if certain conditions are met (like using a PIN), the issuing bank often takes responsibility for fraud. This reduces risk for merchants, contributing to lower fees.

CNP transactions generally have higher fees due to the higher fraud risk. Without the card physically present, verifying the transaction is harder, making it riskier. The higher fees help cover this added risk.

For credit card CP transactions, fees can range from 1.50% to 2.50% of the amount, with an extra flat fee. CNP transactions generally have higher rates, ranging from 1.80% to 3.50%, also with a flat fee.

Understanding card-present vs card-not-present fraud

In 2023, CNP fraud will account for $9.49 billion in loss, and is predicted to reach $10.16 billion in 2024. Card-not-present fraud happens when a scammer uses someone else's stolen card details to make a purchase from a distance. Because the card and the cardholder aren't physically there, and fraudsters often have additional information like the CVV and billing address, it's hard for merchants to confirm the buyer's identity.

One of the most effective methods for confirming online transactions are using the card's verification number (CVN) — the three or four digits on the back of the card — and negative lists, also known as blacklists.

The Address Verification System (AVS) is another useful tool for confirming the address of the person claiming to own the credit card. It cross-checks the billing address provided by the customer with the one on record at the credit card company.

The easiest way for your business to prevent CNP fraud is to integrate robust fraud detection systems that leverage advanced algorithms and machine learning methods, such as Checkout's Fraud Detection Tool. 

These systems examine transaction patterns, customer behavior, and pertinent data to spot potentially fraudulent activities and highlight suspicious transactions for your examination.

Payment processing with

Want to accept CNP transactions and mitigate CNP fraud? can help. Our Payment Processing solution helps you track, analyze and optimize each transaction, enabling you to tailor your services to match your customers’ preferences.

That means higher revenue, flexible solutions and happier customers. Get in touch with our team today for a no-obligation chat, and learn more about how our Payment Processing can help you leverage card-not-present transactions and much more.

Stay up-to-date

Get news in your inbox.

Back to top button
November 3, 2023 18:22
November 3, 2023 18:22