What is Card Not Present (CNP) Transactions?

What is Card Not Present (CNP) Transactions?

Card Not Present (CNP) transactions are a type of payment where the cardholder does not physically present the card to the merchant at the time of the transaction. Instead, these transactions are typically carried out over the phone, online, or through mail order.

Advantages

• Convenience: CNP transactions allow customers to make purchases from the comfort of their own homes.
• Global reach: With CNP transactions, businesses can cater to customers worldwide without the need for a physical presence in every location.
• Reduced fraud liability: Merchants are often protected from certain types of fraud associated with CNP transactions through chargeback protections.

Disadvantages

• Higher risk of fraud: CNP transactions are more vulnerable to fraud since the physical card is not present for verification.
• Higher processing fees: Due to the increased risk associated with CNP transactions, merchants may incur higher processing fees compared to in-person transactions.

Examples of Card Not Present (CNP) Transactions

Common examples of CNP transactions include online shopping, subscription services, and phone orders. In these scenarios, the card information is provided without the card being physically swiped or inserted into a card reader.

Online Purchases

1. E-commerce Websites: Buying products or services from websites like Amazon, eBay, or any other online retail store.
2. Subscription Services: Signing up for subscription services such as Netflix, Spotify, or online newspaper subscriptions.
3. Digital Downloads: Purchasing software, e-books, or other digital content from websites such as Adobe, Apple iTunes, or Google Play.

Telephone Orders

4. Phone Orders: Ordering goods or services over the phone by providing card details to the merchant.
5. Travel Bookings: Booking flights, hotels, or car rentals over the phone with travel agencies or airlines.

Mail Orders

6. Catalog Shopping: Ordering products from a printed catalog by mailing an order form with card details.

Mobile App Purchases

7. In-App Purchases: Buying items within a mobile app, such as extra features, virtual goods, or game credits.
8. Ride-Sharing Services: Paying for rides with apps like Uber or Lyft.

Recurring Payments

9. Utility Bills: Setting up automatic payments for utility bills, such as electricity, water, or internet services.
10. Gym Memberships: Paying for gym memberships with recurring monthly charges.

Digital Wallets and Payment Services

11. PayPal: Using PayPal to make payments without physically swiping or inserting a card.
12. Mobile Payments: Transactions made via mobile payment services like Apple Pay, Google Pay, or Samsung Pay where the card details are stored in the mobile device.

Donations

13. Online Donations: Contributing to charities or crowdfunding campaigns through online platforms.

Remote Work Payments

14. Freelance Payments: Receiving payments for freelance work through platforms like Upwork, Fiverr, or directly via invoicing systems.

Summary – Card Not Present (CNP) Transactions

Card Not Present (CNP) transactions offer convenience and global reach to businesses and customers. However, they come with inherent risks such as increased fraud potential and higher processing fees. Understanding the advantages and disadvantages of CNP transactions is crucial for businesses looking to expand their payment options in an increasingly digital world.