When it comes to online payment processing, fees and associated costs, risks can be determined by whether or not a card is present during a transaction. In today’s article, we are going to take a closer look at the two categories of online payments and describe the differences between them.
What are card present transactions (CPT)?
Card present transactions or CPTs are a type of transaction where a customer physically interacts with a payment mechanism using a card. CPTs occur when you make payments physically in a marketplace. For example, when you buy fruits and vegetables at the local market. However, CPTs are not the only type of transaction.
Card not present transactions explained
In contrast to CPTs, the card not present transaction or CNP is a transaction where neither the cardholder nor the payment card themselves are present. It can occur when, for example, one purchases a t-shirt from a favourite online store. All you need to do is enter your card details in the payment form, receive the verification code, submit it and that’s it.
CP vs. CNP transactions
Besides the physical presence of a cardholder or card, another important factor that distinguishes CP and CNP transactions is the fees charged for them. CNP processing is more expensive than CP. Why does CNP cost more? The answer is that card present transactions are safer, while CNP processing has an increased level of risk, including fraud and chargebacks.
If you are one of those high-risk merchants, you may be wondering which type of transaction is better for you. It basically depends on the needs of your business. Let’s take a look at two possible options:
- As we mentioned before, CP transactions are safer. They can also reduce the risk and cost of transactions. Unfortunately, though, card present transaction processing does not allow for your business to move online, which is very important these days.
- As more and more retail spending is channeled into digital channels, it is becoming increasingly difficult for offline businesses to grow. Almost all transactions made over the Internet rely on cardless transactions to close a deal. The fees are slightly higher, but the added flexibility helps offset the additional risks.
Are CNP transactions more of a risk?
CNP transactions can carry more risk of fraud and scams. For one thing, when a card is not present, it is more difficult to verify the cardholder’s information. In addition, clients can argue that they didn’t make a payment or receive the goods or service.
Some things to consider when processing CNP transactions
The question of how to go about processing CNP transactions is an essential one when it comes to making online payments. This includes collecting sufficient customer information such as:
- phone number;
- email address;
- billing address;
- delivery address.
Also, don’t forget to ensure you have all the necessary credit card information for the correct transaction.
A further point is to prevent chargebacks. The easiest way to do this is to provide clients with information online and invoice on their credit reports to clearly indicate where they have made a purchase and how to make a return or exchange. A copy of your return policy can also be attached to all customer receipts.
Final thoughts
If you’re planning to open a merchant account, keep this brief guide on CP and CNP transactions in mind to ensure you provide your customers with quality payment processing services. If you have any questions, please don’t hesitate to contact our team of professionals!
