Card not present (CNP) Transactions – What are they?

CNP transactions are becoming more and more popular in the 21st century as a means of providing services to customers on a global basis, and no matter which type of business you are operating, you will want to consider this as an option to increase your revenue. However, it is necessary to understand the inherent risks as well as benefits of CNP to ensure that you are getting the most out of the system.

CNP transactions are popular with consumers because they allow them to purchase goods and services without having to be physically present at the point-of-sale. The term “CNP” literally translates to card not present, which means that transactions can take place anywhere in the world, any time, regardless of whether or not the cardholder is physically present and signing a sales slip. The upside to this is that you can take orders over the Internet, via telephone, e-mail, mail, fax and otherwise, and all you need is the card information. Unfortunately, the ease-of-use associated with CNP transactions has made them extremely popular with identity thieves and those individuals who are using fraudulent cards. As long as someone has the necessary information regarding the account that is linked to the card, they can make a purchase with the card, even if they are not actually the individual who owns the card.

It is important to remember that even though a transaction may be authorized, and an authorization code issued, it does not guarantee payment, only that the card has not been reported lost or stolen, and that there are sufficient funds in the account at the time of the transaction authorization. The address given to you by the cardholder is not guaranteed to be correct, and the largest problem is that if the sale turns out to be fraudulent the full amount could be charged back to you as the merchant, which makes you liable for far more than simply the cost of doing business.

Thankfully, there are a variety of security measures that are continually being updated to help fight against CNP fraud for retailers who use automatic electronic authorization processes. CSC, or Card Security Codes, are the three digit numbers on the back of every card issued, and unless the individual in question actually has the card physically in their hand they have no way to access the CSC number, which means that even if they were able to farm the information off of the Internet through phishing means, they cannot use the card without the CSC. In addition, the AVS (Address Verification System) allows merchants to check the numerical portion of the cardholder’s statement address in conjunction with the postal code of the issuing bank.
CNP transactions are a necessary evil in today’s market, and if you want to remain a competitive business you have to consider them as part of your repertoire. Thankfully there are a variety of security measures in place to help make your transactions as safe as possible.

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