Card Not Present transactions (CNP) are digital financial transactions that occur when the physical card isn’t present at the time of purchase. Examples include online purchases, in-app purchases, recurring payment plans and mail order/telephone orders.
In recent years, CNP transactions have become increasingly popular as more people turn to digital solutions for their payment needs. CNP transactions are convenient, secure, and easy to use. However, they also come with a unique set of risks that merchants must be aware of in order to protect themselves from fraud and financial loss.
To help merchants understand the advantages and disadvantages of CNP transactions, this guide will provide an overview of the different types of CNP transactions, the associated risks and how to prevent them, as well as best practices for processing payments.
- Table Of The Content –
- Introduction to CNP Transactions
- Types of CNP Transactions
- Risks of CNP Transactions and How to Prevent Them
- Best Practices for Processing Payments
- Conclusion
Introduction to CNP Transactions
CNP transactions are digital financial transactions that occur when the physical card isn’t present at the time of purchase. They are growing in popularity due to their convenience, security, and ease of use. However, merchants must be aware of the associated risks and take steps to protect themselves from fraud and financial loss.
Types Of Card Not Present Transactions
The most common form of CNP transaction is online shopping via ecommerce websites. Online purchases account for more than half of all CNP transactions. Other types of CNP transactions include in-app purchases, recurring payment plans, mail order/telephone orders, and mobile payments.
Risks of CNP Transactions and How to Prevent Them
CNP transactions are inherently riskier than card present transactions due to the increased difficulty in verifying customer identity. This makes them more vulnerable to fraud and chargebacks. To reduce the risk of fraud and chargebacks, merchants should:
- Utilise a payment gateway that supports advanced fraud detection systems.
- Implement multilevel security measures such as 3-D Secure and Address Verification Service (AVS).
- Require additional information from customers to authenticate their identity.
- Monitor purchases for suspicious activity.
- Follow strong password practices and other security protocols
Best Practices For Processing Payments
To ensure the highest level of security and customer satisfaction, merchants should also follow best practices when processing payments. These include:
- Utilising a payment processor that is compliant with Payment Card Industry (PCI) standards.
- Promptly notifying customers of any changes to the payment terms or process.
- Verifying customer information with any available databases before accepting a payment.
- Encrypting customer data and securely storing it.
- Conducting regular security audits to identify any potential vulnerabilities in the system.
- Conclusion –
CNP transactions are an increasingly popular way for merchants to accept payments, but they also come with unique risks that must be managed. By understanding the different types of CNP transactions and the associated risks, as well as following best practices for processing payments, merchants can reduce their exposure to fraud and financial loss. With careful implementation and management, CNP transactions can be a secure and reliable way for merchants to accept payments.
