Card-Not-Present payments, sometimes referred to as “CNP” payments, include transactions that occur without the physical card being present. This includes internet, mail, fax and telephone orders. These transactions pose a higher risk than card-present transactions because there is a higher likelihood that someone other than the cardholder is attempting to make a purchase.
Due to the high-risk nature of these payments, merchants must have solid fraud detection and risk mitigation tools in place, including authentication and validation protocol. Working with a payment processor who has knowledge of tailored fraud prevention tools can help a merchant deter fraud without losing out on legitimate sales. Card-not-present payments are more subject to chargebacks, which result when a transaction is disputed by the cardholder. In some cases, this occurs as friendly fraud, where the cardholder actually did make the purchase, but has decided to try and defraud the merchant in an attempt to get a refund. In other cases, they are a result of true fraud where the card data was stolen or illegally obtained and used to make a purchase without the cardholder’s knowledge. In both scenarios, the merchant cost is high: they must refund the purchase, often lose the cost of the goods, and face fines and fees from their acquirer and the card associations.
Card-not-present payments have become a popular payment method with the rise of online shopping and e-commerce. It facilitates convenient shopping for consumers who wish to make purchases from the comfort of their own home and it enables online merchants to expand their consumer base beyond the borders of their physical location.