Card Present (CP) vs. Card Not Present (CNP) Transactions: What’s the Difference?

Card Present and Card Not Present Transactions

Card Present (CP) vs. Card Not Present (CNP) Transactions: What’s the Difference?

Posted on 01.10.2018 by Eugene O'Rourke under Consumer Finance, Merchant Processing, Payment Processing

Businesses want streamlined operations and maximum productivity, but sometimes these improvements come at a cost. Payment processing is so synchronized with daily operational costs that the service is easy to overlook as it as a major expense. Fraud liability also plays a role in defining profit margins, so it is important to know how to minimize risks and maximize potential profits. Whether or not the card is present during transactions is one of the biggest factors in determining some of these costs and risks.

What Is a Card Present Transaction?

A card present transaction is one in which the customer physically interacts with payment machinery using his or her card. This can include swiping a card with a magnetic strip, inserting a card with an EMV chip or tapping a mobile device with the card loaded to a digital wallet. Any transaction manually keyed into a credit card machine does not count as a card present transaction, even when the card is physically present. In order to qualify as a card present transaction, the merchant must capture electronic data stored on the card.

What Is a Card Not Present Transaction?

All e-commerce transactions are card-not-present transactions. Phone or catalog orders also fall under the card not present heading. Some businesses use card-not-present transactions almost exclusively, even when it is not necessary. Mobile payment solutions make it quick & convenient for service providers to collect payment information, even when on the go.

Why Is Card Present Better for Business?

When possible, a card present transaction is always the better choice for a business because it reduces risk and cost per transaction. Every card-not-present transaction carries a higher processing fee. When all transactions fall under that heading, the cost can add up quickly. Of course, cost is not the only reason to prefer card present transactions.

Other Benefits of Card Present Transactions

Security is a top concern for both businesses and consumers. When credit card information is provided over the phone, businesses are responsible for securing that information. Failure to keep personal financial information secure can have very expensive repercussions for businesses. When processing transactions using a terminal, whether in-store or via a mobile system, customers retain control of their card and card data, reducing the security burden on businesses.

Liability issues for fraud also come into play. With card-not-present transactions, businesses will have a more difficult time handling chargebacks. After all, the first thing most processing companies will ask for is a signed copy of the receipt. Digital capture makes this easy to provide unless the transaction occurred remotely.

Why Accept Card-Not-Present Transactions?

Since card present transactions are safer, less likely to result in a chargeback and cost less, why should businesses accept card-not-present transactions? With more and more retail spending heading to digital channels, businesses without an online presence are finding it more difficult to grow market share. Virtually all transactions completed through the web, social media or other digital avenues rely on card-not-present transactions to close the sale. Yes, the fees are slightly higher, but the added flexibility helps offset the additional risks.

Both types of transactions have a place in today’s selling landscape. For businesses with routine face-to-face contact with customers, card present transactions should be the norm. When they are not, mobile payment solutions allow businesses to bring terminals to their customers, minimizing the number of card-not-present transactions processed.