What is a Card Not Present (CNP) Transaction?

A Card Not Present (CNP) transaction refers to a payment transaction completed without the physical presence of the cardholder or their credit card. This type of transaction typically occurs in online, phone, or mail-order purchases where the card details are provided electronically or verbally.

How Card Not Present (CNP) Transactions Work

1. Transaction Initiation:
   CNP transactions are initiated when a customer makes a purchase online, over the phone, or through mail-order channels. Instead of swiping or inserting a physical card, the customer provides their credit card details manually.
2. Credit Card Information Exchange:
   During a CNP transaction, the customer submits their credit card information, including the card number, expiration date, and CVV code (Card Verification Value). This information is transmitted electronically to the merchant for payment processing.
3. Payment Authorization:
   Upon receiving the credit card details, the merchant’s payment gateway submits the transaction information to the card issuer for authorization. The card issuer verifies the transaction details and checks the availability of funds in the cardholder’s account.
4. Address Verification System (AVS):
   To mitigate the risk of fraud in CNP transactions, merchants and banks often use the Address Verification System (AVS). AVS compares the billing address provided by the cardholder during checkout with the address on file with the card issuer. A mismatch may indicate a higher risk of fraud.
5. Transaction Approval:
   If the transaction is approved by the card issuer, the payment is processed, and the funds are transferred from the cardholder’s account to the merchant’s account. The transaction is then completed, and the merchant fulfills the customer’s order.

Benefits of Card Not Present (CNP) Transactions

1. Convenience:
   CNP transactions offer convenience for customers, allowing them to make purchases remotely without the need to visit a physical store.
2. Global Reach:
   With CNP transactions, merchants can reach customers worldwide, expanding their market reach and potential customer base.
3. 24/7 Sales:
   Online and phone sales enable merchants to generate revenue around the clock, without being limited by traditional store hours.
4. Reduced Overhead:
   Merchants can benefit from reduced overhead costs associated with maintaining physical retail locations, such as rent, utilities, and staffing.
5. Fraud Prevention Measures:
   While CNP transactions pose a higher risk of fraud, the implementation of fraud prevention tools and technologies, such as AVS, helps mitigate this risk and protect both merchants and cardholders.

In summary, Card Not Present (CNP) transactions provide a convenient and efficient way for customers to make purchases remotely. While they present unique challenges, such as increased fraud risk, the implementation of security measures and fraud prevention tools helps ensure the security and integrity of CNP transactions.