Offering its in-store and online customers multiple ways to make payments is fundamental for every business. Your customers want options, and it’s your job to meet their needs.
Today, a customer can still make purchases even if they don’t have a payment form in hand through a card-not-present transaction. In fact, that’s the term used for purchasing without being physically active.
In 2021, card-not-present transactions comprised 33% of all transactions, an increase from 31% in 2020.
In the case of a card-not-present (CNP) transaction, a cardholder or credit card isn’t physically present while making a payment. This transaction is typical for remote fax, Internet, mail, or over-the-phone orders.
Unlike “card present” transactions, when payment details are provided in person at the time of the sale, CNP transactions are completed without the merchant examining the card visually.
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Card-not-present (CNP) transactions come in various forms, catering to the diverse needs of businesses and customers. These transactions allow payments to be processed remotely, without the physical presence of a card or cardholder.
From online shopping and phone orders to recurring payments and mail orders, CNP transactions make it easier than ever to complete purchases securely and conveniently, no matter the location.
Online shopping is buying products or services over the Internet, allowing customers to shop from anywhere. During this online transaction, customers provide their card number, security code (CVV/CVC), and expiration date. The merchant processes the payment using these details, usually with the help of a payment processor and gateway.
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This is similar to online shopping, with the difference that the customer picks up the order in-store instead of having it delivered. This unique shopping experience saves on shipping. It also offers a faster fulfillment option without the usual wait for conventional delivery.
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When ordering through mail, customers fill out a form providing their billing information and mail it to the company. Mail orders were used frequently before online shopping became popular, and some people still use them today.
Although online shopping has become very popular, many consumers still prefer traditional forms of purchasing or do not have access to the Internet. For such consumers, mail orders are still relevant.
A phone order is a card-not-present transaction where customers provide their card details and billing information to a salesperson over the phone, who then processes the charge.
This type of transaction is useful for customers who prefer verbal communication or cannot access online shopping platforms. Phone orders also allow businesses to cater to a wider range of customers, ensuring a seamless purchasing experience regardless of the customer's preferred transaction method.
Card-on-file payments are a common type of card-not-present transaction. Here, a merchant stores customer cards and payment information, billing customers when appropriate after being authorized by them.
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Using online payment systems, businesses send invoices for customers to pay electronically. The invoices can be paid with credit or debit cards, digital wallets, or bank transfers.
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The difference between card-not-present and card-present transactions may seem simple. But, it involves more than just the physical presence of the credit card.
A card-present transaction is identified by the capture of electronic data when the sale occurs. This can be accomplished by magnetic strip card swiping, tapping an NFC/contactless digital wallet connected to a stored card (like Apple Pay on a smartphone), or inserting an EMV chip card.
We explored some examples of CNP transactions. Let’s now list a few examples of card-present transactions:
All other payment methods fall under the category of "card-not-present" transactions.
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There are various ways that businesses can securely accept card-not-present transactions:
These methods ensure that CNP transactions are processed smoothly and securely.
When businesses process card-not-present payments, they incur fees similar to those charged for processing credit cards in person.
These include:
Interchange fees tend to be higher for CNP transactions due to the increased risk of fraud and chargebacks.
As a result, merchants typically end up paying more for CNP transactions than for card-present transactions. The total cost of CNP processing fees varies depending on the industry and the payment processor's markup. The markup is calculated using a formula that considers these factors.
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Advances in CNP transaction technology are revolutionizing the way businesses process payments, enhancing efficiency, security, and customer experience. As consumer expectations grow and digital payment methods evolve, these emerging technologies are shaping the future of payments.
Blockchain technology creates a decentralized and unalterable ledger system, which enhances transaction transparency and ensures the integrity of digital payments. By enabling secure and verifiable transactions, blockchain is poised to play a major role in reducing intermediaries and streamlining the payment process.
AI/ML algorithms can analyze large amounts of transaction data in real-time, identifying patterns that improve decision-making and drive smarter payment processing. As a powerful AI solution, these systems are continuously improving, becoming more adept at handling novel payment methods and ensuring operational efficiency in digital transactions.
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NLP allows businesses to analyze customer communication, such as emails and chat interactions, to gain valuable insights into consumer behavior. By understanding customer intent and sentiment, NLP is helping businesses enhance personalized experiences and customer engagement during transactions. It is also used to find any signs of phishing or social engineering. By issuing alerts, NLP helps to prevent fraudulent transactions.
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Biometric verification, including facial, fingerprint, or voice recognition, is becoming an essential part of the transaction process, offering an additional layer of security and user convenience. These biometric identifiers are more seamless than traditional authentication methods, and they significantly reduce friction during payment processing.
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Behavioral analytics tracks customer behavior patterns and uses advanced algorithms to provide insights that help businesses improve user experience. By analyzing purchasing habits and transaction history, businesses can offer more tailored services and enhance overall customer satisfaction.
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Companies that take orders over the phone can greatly benefit from tools like DepositFix. The company is invaluable for businesses operating in sectors such as coaching and training. Imagine a salesperson offering personalized coaching sessions over the phone. During the call, the client expresses interest in a particular program and is ready to purchase.
In this case, the salesperson can smoothly obtain the client's credit card information and securely process the payment using DepositFix. DepositFix handles card details with top security and ensures compliance with industry standards. It also provides a smooth purchase experience for the client and the business.
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Card-not-present (CNP) transactions continue to be a cornerstone of modern commerce, offering unmatched convenience and flexibility for both businesses and consumers. As technology advances, the future of CNP transactions promises even greater efficiency, personalization, and accessibility.
With innovative tools like blockchain, AI, and biometric verification, businesses can stay ahead of evolving customer expectations and create seamless, secure payment experiences that drive growth and satisfaction.
Discover the hidden automation potential in your payment, billing and invoicing workflows. Talk to our experts for a free assessment!
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