What retailers need to know about Card-Not-Present transactions

Remote payments, also known as card-not-present (CNP), are made by credit cards. These payments are made remotely and don’t require you to swipe, insert, or tap the card at the payment terminal.

According to a 2021 study done by PULSE, remote purchases now account for one third of debit transactions. An active card can make 7.5 card-not present transactions per month.

Customers can make purchases online or by phone using CNP payments. They can also choose the time and place that is most convenient for them. Retailers have the opportunity to increase their sales and marketing channels.

Card-not-present payments have their benefits and disadvantages. This guide will help you make the most out of CNP payments at your store.

What is a “card-not-present” (CNP) transaction

When a card isn’t physically presented at the checkout, a card-not present (CNP) transaction occurs.

CNP transactions are when the card was not in direct contact with a payment terminal. The card was not swiped or inserted into a card reader with a chip card. It also wasn’t used for contactless payment using NFC or RFID technology.

Card-present transactions are transactions that involve this contact.

Card-not present transactions are online payments that are made via phone orders, online shopping and mail. These transactions also include the scenario where a merchant enters card details manually into the payment terminal, instead of scanning, inserting, tapping, or tapping the card.

Here are some examples of transactions that are not card-not present

These are some examples of CNP transactions:

  • Online orders. Customers add products to an online shopping basket and check out with their card details.
  • Order online and pick up in-store ( OPIS ) Similar to online orders except that the customer picks up the order rather than having it delivered.
  • Phone orders. The customer places an order by calling the sales agent and giving their credit card details.
  • Mail orders. Postal payments, such as when you order from a physical product catalogue.
  • Recurring payment. Customers sign up for recurring deliveries, such as a subscription box, or a product that they wish to replenish frequently, and their payment is made automatically using the payment card data stored by the retailer.
  • Invoice payments. An invoice is paid by a customer. It can be sent online using an online payment system.
  • Card-on-file payments. Customers can authorize merchants that they retain their credit card information to be used for future payments.

Card-not-present transactions

It is essential to ensure that card-not present transactions are processed correctly for your business and your customers’ safety and security.

Customer information is essential

 

When you are checking out, certain customer and credit card information will be required. These are:

  • Address for billing
  • Shipping address
  • Telephone number
  • Name of the cardholder (as it appears in the card)
  • Number of credit card
  • Expiration date for cards (monthly and annually)
  • Card security code (CSC), three- to four-digit code at the back of your card

This should be possible with your payment processing system. For a faster checkout and inventory reconciliation, it is a good idea to integrate payment processing with your point of sale system (POS).

CNP transactions at merchant rates

It is a fact that every card payment you receive from your customers incurs a fee.

This fee is slightly higher for card-not present transactions. CNP transactions are more vulnerable to fraud because you cannot validate the card or cardholder in person. You will pay an assessment, interchange and processing fee as well as the rate charged by your payment provider.

Transaction fees are usually structured like this:

[Percentage of transaction] + [fixed price per transaction]

2.9% + 30C/ . They may vary depending on the credit card company and payment processor.

Card-not-present transactions may result in a higher fee, a fixed cost or both. These are systems and protocols that protect your ecommerce transactions from fraudulent transactions.

PRO TIP Shopify payments are included in all Shopify POS plans. There is no setup or sign-up fee. You can control your cash flow and pay the same rate pre-negotiated for all credit cards starting at 2.4% + $0.00

Card-not-present fraud

Business owners are at risk of credit card fraud if they don’t physically inspect the card. Card-not-present fraud is an expensive issue for merchants–LexisNexis reported that every $1 of fraud cost US merchants $3.60 in 2021, up 15% from 2019.

Here are some facts about CNP fraud.

What is card-not present fraud?

Card-not present fraud is when fraudsters use another person’s card information to make a purchase online.

Fraud prevention processes are not in place. The person who commits fraud only needs to know a few details about the card like the card number and expiry date.

Card-not-present chargeback fraud

chargeback is when a customer disputes a transaction made with their credit card company, or the issuing bank.

Friendly fraud is also known by chargeback fraud. This is a scam where a customer claims that they received a defective product or no product. Instead of asking for a refund, the merchant will charge them back.

Prevention of card-not present fraud and chargeback fraud

  • PCI Compliance
  • Install an address verification system (AVS).
  • Verify card security codes
  • Create a customer bill statement
  • Make a clear exchange and return policy

Your responsibility is to ensure that your card-not present transactions are protected. These are some systems that you can use.

PCI compliance. PCI compliance is a standard of security for credit and debit card processing organizations. It includes areas such as monitoring a secure network and protecting cardholder data. PCI compliant hosting and ecommerce software are required for your store.

Establish an address verification system (AVS). AVS verifies the billing address and ZIP codes of customers with credit card issuers by comparing the numeric portion. AVS will give a code to the merchant if there is a mismatch. AVS is worth the effort as unauthorized users are often unable to provide the correct billing address.

Use card security codes . The three- to four-digit number found on the back of Mastercard, Visa and American Express cards is called a card security code (CSC). It is also called a CVC (card verification code), CVV (card verify value) or CVV2 (card verification number). The CSC can be used to verify that the customer has physical access to the card. Stolen credit card information should not contain CSC details.

Create a customer bill statement. You can customize the text on your customer’s credit cards bill. Add the name of your store to let your customer know what the charge is for. This will reduce confusion for customers when they review their bank statements or credit cards statements.

Outline clear exchange and return policy. Clear options and processes should be highlighted for customers who are unhappy with their purchase. You can return the product to receive a full refund, or exchange it for another color, size, etc. This will encourage customers to contact you instead of going through the dispute process with their card issuer.

PRO TIP Shopify payments are included in all Shopify POS Plans and come with Automatic Dispute Resolution which nearly doubles your chargeback dispute win rate.

CNP transactions can be accepted with confidence

Card-not present doesn’t need to be costly or stressful. You now have a better understanding of the different types of CNP fraud. Now you can protect yourself with PCI compliance, AVS authentication and CSC validation.

These systems will allow you to focus on other things and be assured that your card-not present transactions are being taken care of.

What is the best scenario? Having payment processing integrated into your POS system. Shopify PO protects your online transactions against fraud by offering built-in payment processing, PCI compliance and competitive credit card rates. Shopify stores all transactions and inventory information so that you can manage your entire business from one place.

source https://www.shopify.com/retail/card-not-present

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