Online shopping is a booming industry. And it’s only going to get bigger.

In 2023, a whopping 2.64 billion people shopped online, a number that’s set to hit 2.71 billion by the end of 2024. That’s a lot of people buying from home.

For growing businesses, that can only mean one thing: card-not-present (CNP) transactions are now a necessity. In this article, we explore how CNP transactions work and why they matter for your business.

Let’s dive in.

But first, what is a card-not-present transaction (and how is it different from a card-present transaction)?

When it comes to pinning down the difference between a card-present (CP) transaction and a card-not-present (CNP) transaction, the clue is in the name.

A CP transaction requires a physical debit or credit card. To make the purchase, the customer needs to tap, swipe, or insert their card at a point-of-sale (POS) machine.

A CNP transaction, on the other hand, is a payment that is processed online – without a physical card. Think online shopping, phone orders and in-app payments.

But there are a few more subtle distinctions.

Let’s dig a little deeper into how CNP and CP transactions compare.

Card-present transactions Card-not-present transactions
Physical presence – the card is tapped or inserted at the POS machine. Remote purchase – the payment is done online or over the phone.
In-person verification – the merchant can verify the card visually and is therefore more likely to spot suspicious features or signs of tampering. Online security features – tokenisation, where sensitive card info is replaced with unique tokens that are meaningless to potential hackers, can help reduce security risks.
Lower fraud risk – the presence of the card and cardholder in-store makes fraud less feasible. Increased fraud risk – without someone to verify the card in person, additional security measures are necessary to prevent fraud.

So, why should you care about CNP transactions?

In an increasingly online world where convenience is king, ease and accessibility are essential to shoppers. CNP transactions allow you to reach more customers wherever they are – and make it easier for them to buy on their own terms.

This increased reach and flexibility can only mean one thing: increased sales potential for your business.

How to make CNP transactions safe and secure

Small businesses concerned about the higher risk of fraud have been wary of transitioning to CNP transactions. Why risk fraud and other hassles when in-store transactions allow you to verify cardholder identity firsthand?

But with the right security measures in place, you can protect your business and your customers – and reap all the rewards CNP transactions can bring.

Below, we outline a few simple measures you can implement to make your CNP transactions safe and secure.

  1. Secure gateways and payment processors: Choose a reputable payment platform with robust security features to encrypt and protect customer data during online transactions. Ensure they are PCI-DSS Level 1 compliant.
  2. Use 3D Secure (3DS) where appropriate: Add a second layer of verification by sending a one-time code to the customer’s phone to verify they are the true cardholder. This is known as 3D Secure in the industry.
  3. Tokenisation: Replace sensitive card info with a unique token that’s meaningless if intercepted. This will reduce the risk of hackers intercepting private details in a data breach.
  4. Real-time monitoring: Use real-time monitoring tools to spot unusual patterns or high-risk transactions. These tools allow you to intervene promptly if you suspect suspicious activity.
  5. Conduct risk assessments: Run regular security assessments and promptly address vulnerabilities to minimise the risk of unauthorised access.

Combining these measures to create a multi-step security setup is the best way to ensure reliable protection and keep your transactions secure.

Why CNP transactions cost a little more

There’s no getting around it – CNP transactions typically carry higher fees than CP transactions.

There are several different components to your transaction costs: card scheme fees, interchange fees, processing fees and your payment provider’s rate. They’re an inevitable part of processing card transactions. These fees are higher for CNP versus CP transactions.

Transaction fees are typically charged according to the following formula: [% of transaction] + [fixed cost per transaction]. Pin Payments, for example, charges 1.6% + 30 cents per transaction in Australia and 1.9% + 30 cents in New Zealand.

Despite the costs, CNP transactions are still worth it

Despite extra security costs, CNP transactions offer major advantages that are guaranteed to benefit your business. These include:

  • Global reach: Tap into a global market and reach wider audiences without physical limitations.
  • Convenience for customers: Customers can access your products and services anytime, anywhere.
  • Automation: Save time and reduce manual errors with streamlined payment processing.
  • Secure card storage: Safely store customers’ card details, making it easier for them to repeat purchases.

Ready to get started? Pin Payments offers CP and CNP transactions with robust security measures and competitive pricing. Get in touch to find out how CNP payments can take your business to the next level.