Industry Terms: Card-Not-Present

Posted: May 24, 2012 | Updated: November 18, 2020

This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. Well we want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s terms are card-not-present and card-present.


card not present transaction (CNP) is a credit card purchase made over the telephone or over the Internet where the physical card has not been swiped into a reader. We touched lightly on the topic in our Knowledge Base Entry on MO/TO found here.

CNP  can be a major route for credit card fraud. If a fraudulent transaction is reported, the bank that hosted the merchant account that received the money from the fraudulent transaction must make restitution. Whereas in a swiped transaction the bank that issued the credit card is liable for restitution. Because of the higher risk, CNP transactions have a specific set of rules that is more restrictive than the rules for retail merchants.

CNP merchants must take extra precaution against fraud exposure and associated losses, and they pay higher rates for the privilege of accepting cards. Fraudsters bet on the fact that many fraud prevention features are not used for small transactions. Merchant associations have developed some prevention measures, such as single use card numbers, but these have not met with much success. Customers expect to be able to use their credit card without any hassles, and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud. Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures.

Card Present

A type of transaction in which the card is present and is swiped through an electronic device that reads the contents of the magnetic stripe on the back of the card. Most transactions run through a payment processing terminal are of the card present type and that’s essentially what the terminal is there to do — validate the presence of the card by recognizing the consumer is present at the point of purchase.

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